Most Asian currencies edged lower on Thursday as the U.S. dollar strengthened ahead of key central bank meetings in Europe and the United Kingdom. A broader selloff across global financial markets also dampened appetite for risk-sensitive currencies.
Attention was also on India, with markets awaiting a Reserve Bank of India policy decision on Friday. The Indian rupee held firm after a long-anticipated trade agreement between New Delhi and Washington boosted sentiment earlier in the week.
Yen weak ahead of Japan election, yuan holds firm
The Japanese yen stayed under pressure, with USD/JPY rising about 0.1% and hovering close to the 157 level. Focus remained on this weekend’s lower house elections, where Prime Minister Sanae Takaichi’s party is expected to secure a larger majority. Such an outcome could pave the way for increased fiscal spending.
Concerns over Japan’s already heavy government debt have weighed on the yen in recent weeks, a trend reinforced after Takaichi appeared to downplay currency weakness during the campaign.
In contrast, the Chinese yuan was little changed and remained near its strongest level in almost three years. The currency has been supported by a series of firm daily midpoint fixings from the People’s Bank of China, with USD/CNY trading comfortably below the key 7.0 psychological level.
Elsewhere in Asia, most currencies weakened. The Australian dollar slipped 0.3%, falling back below $0.70 after two days of gains following a hawkish Reserve Bank of Australia meeting. The Indian rupee steadied near 90.4 per dollar, with the Reserve Bank of India widely expected to keep interest rates unchanged at 5.25% amid growing economic uncertainty.
Although USD/INR pulled back sharply from record highs after the U.S.–India trade deal, analysts expect the pair to remain above the 90 level in the near term. The South Korean won and Singapore dollar both weakened modestly, while the Taiwan dollar edged lower as a sharp selloff in local technology stocks pressured the currency.
Dollar firms ahead of ECB and BoE decisions
The dollar index and dollar index futures both rose around 0.1% in Asian trading. The greenback strengthened against the euro and the pound as investors positioned ahead of interest rate decisions from the European Central Bank and the Bank of England later in the day.
Both central banks are widely expected to leave rates unchanged, as policymakers remain cautious amid elevated global market volatility.
The dollar continued to recover from near four-year lows after markets reassessed Kevin Warsh, the nominee of Donald Trump to lead the Federal Reserve. While Warsh has voiced support for lower interest rates, he has also criticized the Fed’s asset purchase programs, raising expectations that longer-term U.S. monetary conditions could tighten more than previously assumed.
Looking ahead, investors are also focused on U.S. nonfarm payrolls data for January. The release, originally scheduled for Friday, has been postponed to February 11 following a partial government shutdown earlier in the week.
