Most Asian currencies moved lower on Tuesday, as Lunar New Year holidays across much of the region kept trading activity subdued. Thin liquidity limited price action, while the U.S. dollar attracted modest demand ahead of a busy week filled with key economic data releases.
Trading conditions were also quiet in the United States following a public holiday on Monday. The lack of participation in both U.S. and Asian markets resulted in limited directional cues for currency traders.
Markets in China, Hong Kong, Taiwan, South Korea, and Singapore remained closed for the Lunar New Year. Chinese exchanges are expected to stay shut until next week, further dampening regional currency flows.
Dollar edges higher as focus shifts to U.S. data and Fed minutes
The U.S. dollar index and its futures posted slight gains during Asian trading hours, building on strength recorded overnight. Investor attention is now firmly fixed on upcoming U.S. economic indicators, particularly the release of the Federal Reserve’s January meeting minutes scheduled for Wednesday.
The Fed recently left interest rates unchanged but emphasized that inflation risks and labor market uncertainties remain. Since that decision, employment and consumer inflation data have delivered mixed signals about the health of the U.S. economy.
Additional reports, including industrial production and trade figures, are expected in the coming days and could provide further direction. However, the most closely watched release will be Friday’s Personal Consumption Expenditures (PCE) price index for December. As the Federal Reserve’s preferred inflation measure, the PCE report plays a critical role in shaping long-term interest rate expectations.
Japanese yen stabilizes, Australian dollar subdued
The Japanese yen strengthened modestly, with USD/JPY slipping 0.2%. The move followed heavy losses in the previous session after fourth-quarter GDP data came in significantly weaker than anticipated. The soft growth figures fueled concerns about Japan’s economic momentum and increased speculation about potential stimulus measures from Tokyo.
At the same time, reports suggesting the Bank of Japan could raise interest rates as early as April offered some support to the yen.
Elsewhere, the Australian dollar edged lower. The minutes from the Reserve Bank of Australia’s February meeting showed policymakers remained cautious about further rate hikes after delivering a 25 basis point increase. Officials acknowledged persistent inflation pressures and indicated that additional tightening could still be considered if price growth remains elevated.
The Chinese yuan’s offshore USD/CNH pair rose slightly but hovered near three-year lows. Meanwhile, the Singapore dollar and South Korean won were largely unchanged amid holiday-thinned trading.
The Indian rupee remained steady against the dollar, with USD/INR holding above the 90 level. Stronger-than-expected inflation data released last week provided limited support to the currency, as broader dollar strength continued to dominate sentiment.
