Most Asian currencies traded within a narrow range on Monday, while the U.S. dollar edged higher as investors assessed U.S. President Donald Trump’s nomination for the next chair of the Federal Reserve.
The Japanese yen weakened in volatile trading after comments from Prime Minister Sanae Takaichi appeared to reduce expectations of near-term currency market intervention by Japanese authorities.
Moves across the broader Asian FX market remained subdued, as traders awaited further economic signals later in the week. Key events include a policy meeting from the Reserve Bank of Australia and the release of U.S. nonfarm payrolls data.
Dollar firms after Trump taps Warsh for Fed chair
The dollar index and dollar index futures both rose around 0.1% during Asian trading hours, extending gains from last week when the greenback rebounded sharply from a near four-year low.
Dollar strength followed Trump’s nomination of former Federal Reserve governor Kevin Warsh to succeed current chair Jerome Powell.
While Warsh is broadly seen as supportive of Trump’s calls for lower interest rates, he has also been critical of the Federal Reserve’s large-scale asset purchases. This has led markets to reassess expectations, with longer-term policy under Warsh potentially less dovish than initially assumed.
Analysts at ANZ said a Warsh-led Federal Reserve would likely favour a smaller balance sheet, limiting support for aggressive fiscal expansion.
At the same time, they noted that Warsh may prioritise labour market weakness as the greater risk to the Fed’s mandate of maximum employment and price stability, potentially opening the door to further rate cuts if he is confirmed.
Powell’s term as Fed chair ends in May. He recently urged his successor to remain independent from political pressures.
Yen weakens after Takaichi comments
The Japanese yen underperformed its regional peers on Monday, with the USD/JPY pair rising as much as 0.5% and climbing above the 155 level.
The move followed remarks by Takaichi during a campaign speech, where she highlighted the benefits of a weaker yen for exporters. Her comments appeared to contrast with earlier warnings from officials about excessive currency weakness.
Takaichi later appeared to soften her stance. Previously, several Japanese officials, including Takaichi herself, had cautioned against sharp yen moves, fueling speculation that government intervention could be imminent.
That expectation helped the yen strengthen sharply through January. However, the currency remains close to levels that previously prompted intervention. Recent reports have suggested Japan and the U.S. may be discussing coordinated action to support the yen.
Asian FX steady ahead of key economic events
Other Asian currencies moved within a flat-to-lower range, as markets lacked clear short-term catalysts.
The Australian dollar slipped 0.2%, with attention focused on the outcome of a Reserve Bank of Australia meeting on Tuesday. The central bank is widely expected to raise interest rates by 25 basis points, supported by data showing a rebound in Australian inflation during the second half of 2025.
The South Korean won weakened, with the USD/KRW pair rising 0.5%, pressured by heavy foreign outflows from local equity markets amid selling in major technology stocks.
The Chinese yuan was little changed, as mixed purchasing managers’ index data for January failed to generate a clear market reaction.
The Singapore dollar edged slightly higher, while the Taiwan dollar was broadly flat.
The Indian rupee weakened modestly, with USD/INR rising 0.2% and hovering near record levels. Investor sentiment remained cautious after the government’s fiscal 2027 budget outlined increased spending aimed at boosting domestic manufacturing.
