Most Asian currencies traded within narrow ranges on Tuesday, with the Japanese yen holding on to gains made overnight after hawkish signals from the Bank of Japan supported the currency.
Regional FX markets found some stability as the U.S. dollar steadied following a volatile session on Monday. Markets had initially been shaken by the surprise U.S. capture of Venezuelan President Nicolas Maduro, but concerns eased as investors assessed the limited near-term impact of the development.
Attention this week is turning to a series of key economic indicators from both the United States and Asia, which are expected to provide clearer signals on interest rate and fiscal policy direction. Until then, Asian currencies are likely to remain rangebound.
Yen holds gains on BOJ rate hike signals
The Japanese yen was steady on Tuesday after strengthening overnight. The dollar-yen pair hovered around 156.4, after sliding from above 157 in the previous session.
Support for the yen came from comments by BOJ Governor Kazuo Ueda, who said the central bank would continue raising interest rates if wage growth and inflation remain in line with forecasts. His remarks followed the BOJ’s decision in December to raise interest rates by 25 basis points to a 30-year high.
The yen also benefited from ongoing speculation that Japanese authorities could step in to support the currency, after recent weakness pushed it toward levels that previously triggered market intervention.
Elsewhere in Asia, currency moves were limited. The Chinese yuan edged 0.1% higher against the dollar, remaining near its strongest level in about two and a half years. Sentiment was supported by optimism over additional stimulus measures from Beijing.
Investors are now awaiting Chinese inflation data due on Friday, which could offer further insight into the health of the world’s second-largest economy as it continues to face a prolonged growth slowdown.
The Australian dollar rose 0.1%, with markets looking ahead to December consumer price index data due on Wednesday. Recent signs of persistent inflation have reduced expectations for further rate cuts by the Reserve Bank of Australia.
The Singapore dollar strengthened slightly, while the South Korean won was largely unchanged. The Indian rupee remained under pressure, trading above the 90-per-dollar level.
Dollar steadies after Venezuela volatility; payrolls awaited
The dollar index and its futures were little changed in Asian trading after swinging sharply on Monday. While the greenback initially gained following the U.S. operation in Venezuela, it later reversed course as investors concluded the broader economic impact would likely be limited.
Markets are now firmly focused on the upcoming U.S. nonfarm payrolls report for December, due on Friday. The data is expected to offer critical insight into labor market conditions and could influence the next policy steps by the Federal Reserve.
