Most Asian currencies moved sideways on Thursday, with price action largely muted across the region. The Japanese yen hovered near 18-month lows amid renewed concerns over a possible snap election, while the South Korean won gave back strong gains that had been driven by verbal backing from U.S. Treasury Secretary Scott Bessent.
The U.S. Dollar Index was mostly unchanged, remaining close to one-month highs. U.S. Dollar Index futures were also flat as of 05:21 GMT, reflecting cautious market sentiment.
Yen weighed down by snap election speculation
The Japanese yen strengthened briefly overnight, with USD/JPY falling 0.4%. However, the pair edged up 0.1% on Thursday, staying close to one-and-a-half-year highs.
The yen has come under sustained pressure in recent sessions following speculation that Prime Minister Sanae Takaichi may be preparing to call an early election in February. Markets have generally viewed the prospect of a Takaichi-led government as negative for the currency, pointing to her preference for expansionary fiscal policy, increased public spending, and continued loose monetary conditions.
Investors worry that renewed stimulus efforts could restrict the Bank of Japan from normalising policy, further widening yield gaps with the United States and adding pressure on the yen. Although Japanese officials have cautioned against excessive currency volatility—helping the yen stabilise—overall sentiment remains fragile.
South Korean won retreats after brief rebound
In South Korea, the won resumed its downward trend, extending a losing streak that has seen it fall in eight of the past nine sessions. The USD/KRW pair rose 0.7% on Thursday, reversing a 0.8% decline in the previous session.
The earlier rebound followed rare verbal support from Scott Bessent, who said the won’s recent weakness did not align with South Korea’s economic fundamentals. He highlighted the country’s strong economic performance and its importance as a key Asian partner supporting U.S. industries.
Separately, the Bank of Korea kept its benchmark interest rate unchanged at 2.5% on Thursday and signalled that its current easing cycle may be coming to an end.
Broader Asia FX cautious amid U.S. policy signals
Elsewhere, Asian currencies remained subdued as investors digested comments from U.S. President Donald Trump, who told Reuters he has no plans to dismiss Federal Reserve Chair Jerome Powell despite an ongoing criminal investigation.
While these remarks helped ease concerns about the Federal Reserve’s independence, traders stayed cautious amid lingering policy uncertainty in Washington and its potential effect on interest rate expectations.
In China, USD/CNY slipped 0.1% in onshore trading, while USD/CNH was largely unchanged offshore. The Singapore dollar saw USD/SGD rise 0.1%, and USD/INR for the Indian rupee traded flat. The Australian dollar’s AUD/USD pair was also mostly unchanged on the day.
