Asian Currencies Ease as Dollar Holds Steady Before U.S. Inflation Data
Most Asian currencies edged lower on Friday, while the U.S. dollar stabilized as traders assessed the interest rate outlook ahead of closely watched U.S. consumer price index (CPI) data later in the day.
Despite the daily pullback, several regional currencies were still on track to post weekly gains. The dollar, meanwhile, remained under pressure and was heading for weekly losses amid rising uncertainty over the future path of U.S. interest rates.
Japanese Yen Leads Weekly Gains on Intervention Speculation
The Japanese yen emerged as one of the strongest Asian currencies this week. Growing speculation about possible government intervention in the currency market helped traders overlook fiscal concerns linked to Japan’s spending policies.
On Friday, the USD/JPY pair rose 0.2%. However, for the week, the pair was down roughly 2.6%, marking the yen’s best weekly performance since November 2024.
The currency strengthened after several hawkish remarks from Japanese officials signaled readiness to intervene if needed. These comments helped offset worries about elevated fiscal spending under Prime Minister Sanae Takaichi.
Australian Dollar Hits Three-Year High
The Australian dollar also posted strong gains this week. The AUD/USD pair climbed 1% and reached a three-year high following a series of hawkish statements from the Reserve Bank of Australia, which reinforced expectations of tighter monetary policy.
South Korean Won and Chinese Yuan Advance
The South Korean won gained ground as well, with the USD/KRW pair falling 1.4% this week. The currency benefited from increased foreign capital inflows into domestic equity markets, particularly chipmakers linked to the artificial intelligence sector.
The Chinese yuan saw modest moves on Friday, with the USD/CNY pair ticking slightly higher. However, the pair was still down 0.4% for the week after multiple strong midpoint fixes from the People’s Bank of China. The yuan remained close to a near three-year high reached earlier in the week.
Elsewhere, the Indian rupee traded largely flat on a weekly basis, while the Singapore dollar strengthened modestly, with the USD/SGD pair declining 0.6%.
Dollar Steadies Ahead of Key CPI Report
The dollar index and dollar index futures edged higher during Asian trading hours, as investors focused on January’s U.S. CPI inflation data.
Market expectations point to a slight moderation in both headline and core CPI readings. However, traders remained cautious about potential upside surprises, especially since January inflation data has exceeded forecasts in each of the past four years.
The dollar received some support earlier in the week from stronger-than-expected U.S. nonfarm payrolls data. Even so, the greenback was still down approximately 0.7% for the week.
Uncertainty surrounding U.S. monetary policy continued to weigh on sentiment, particularly following Kevin Warsh’s nomination as the next Chairman of the Federal Reserve. Investors are closely watching how leadership changes could influence future interest rate decisions.
