Most Asian currencies traded largely unchanged on Monday, as investors digested weaker-than-expected economic data from China. At the same time, the Japanese yen remained supported by growing expectations that the Bank of Japan could raise interest rates later this week.
Currency markets across Asia moved within tight ranges, with traders staying cautious ahead of major U.S. economic releases. Key events include upcoming inflation data and the closely watched nonfarm payrolls report, both of which are likely to influence expectations for the Federal Reserve’s policy direction into the new year.
The U.S. Dollar Index, which tracks the dollar against a basket of major currencies, was mostly steady during Asian trading hours.
Weak China data weighs on regional sentiment
Earlier in the session, fresh data highlighted uneven economic momentum in China during November. Industrial production growth eased slightly to 4.8% year-on-year, while retail sales increased by just 1.3%. The weak retail figures fell well short of forecasts and reinforced concerns over sluggish consumer demand.
According to analysts at ING, China’s economic performance continues to lose momentum toward the end of the year, with key activity indicators underperforming expectations in November. They noted that policymakers face significant challenges if domestic demand is to become a main driver of growth in 2026.
In currency markets, the onshore Chinese yuan (USD/CNY) slipped 0.1%, while the offshore yuan (USD/CNH) was little changed. The South Korean won strengthened modestly, with USD/KRW down 0.2%, while the Singapore dollar traded flat against the U.S. dollar.
The Indian rupee weakened further, hitting a fresh record low as USD/INR rose 0.2% to 90.71. Meanwhile, the Australian dollar edged lower, with AUD/USD down 0.1%.
Yen strengthens on BOJ rate hike expectations
The Japanese yen outperformed its regional peers, with USD/JPY falling 0.4%. The move followed a business survey showing improved corporate confidence, which added to expectations that the Bank of Japan may proceed with an interest rate hike at its upcoming policy meeting.
Markets have increasingly priced in tighter policy, supported by signs of stronger wage growth and easing deflationary pressures. Investors are also expected to closely monitor guidance from BOJ Governor Kazuo Ueda for signals on the pace and scope of further policy normalisation.
ING analysts said inflation is likely to remain around 3% in November, driven by rising services prices, a trend they believe will keep the Bank of Japan on a rate-hiking path.
