Asia FX Firms as Dollar Weakens Ahead of US Payrolls
Most Asian currencies strengthened on Wednesday as the U.S. dollar extended recent losses ahead of key nonfarm payrolls data due later in the session. Meanwhile, the Chinese yuan remained largely unchanged following softer-than-expected inflation figures for January.
The Australian dollar led regional gains, climbing to a three-year high after fresh hawkish signals from the Reserve Bank of Australia (RBA). The Japanese yen also advanced, building on recent momentum after Prime Minister Sanae Takaichi secured a decisive victory in Japan’s lower house election. Japanese markets were closed for a public holiday.
Chinese Yuan Steady Despite Weak Inflation Data
The USD/CNY pair hovered around 6.91 yuan, close to its weakest level since May 2023. The yuan showed limited reaction to consumer price index (CPI) data, which came in below expectations for January.
Producer price index (PPI) data also pointed to continued contraction, marking another month of factory-gate deflation. The figures highlighted that China’s broader disinflationary trend remains intact.
Part of the inflation distortion stemmed from the timing of the Lunar New Year. In 2025, the holiday fell in late January, temporarily boosting consumer spending and inflation. In contrast, the 2026 Lunar New Year will begin on February 15 and span nine days, potentially shifting seasonal price pressures into February data.
Despite the seasonal factors, the latest numbers reinforced expectations that Beijing may need to introduce further stimulus measures, especially as producer prices recorded a 40th consecutive month of decline.
Australian Dollar Surges on Hawkish RBA Signals
The AUD/USD pair jumped 0.7% to $0.7125, reaching its strongest level in three years. The rally followed hawkish remarks from RBA Deputy Governor Andrew Hauser, who stated that inflation remains elevated and that current interest rates may not be sufficiently restrictive.
His comments came just one week after the RBA raised rates by 25 basis points—its first hike in two years—amid renewed inflation pressures in late 2025. The market interpreted Hauser’s tone as signaling the possibility of further rate increases this year.
Investors are now looking ahead to first-quarter inflation data for clearer guidance on the RBA’s policy trajectory.
Dollar Soft Ahead of US Jobs Report
The dollar index slipped between 0.1% and 0.2% in Asian trade, extending earlier losses. Weaker U.S. retail sales data added pressure, raising concerns about slowing consumer spending and economic growth.
Attention now turns to the upcoming nonfarm payrolls report. Any signs of sustained labor market weakness could weigh further on the dollar and shape expectations for Federal Reserve policy.
U.S. CPI inflation data is also scheduled for release on Friday, providing additional insight into price trends and potential interest rate adjustments.
Regional Currency Moves
A softer dollar supported broader Asian currencies. The Japanese yen strengthened, with USD/JPY falling 0.5% to around 153.6, its lowest level in nearly two weeks.
Elsewhere, the Singapore dollar edged higher as USD/SGD declined 0.1%. The South Korean won underperformed slightly, with USD/KRW rising 0.3%. The Indian rupee remained relatively stable, with USD/INR hovering near 90.5.
Overall, Asian FX markets remain sensitive to upcoming U.S. economic data, which could determine the next move in the dollar and regional currencies.
