Most Asian currencies strengthened on Tuesday as the U.S. dollar weakened ahead of a series of important U.S. economic releases. The Japanese yen also rebounded sharply after Japanese authorities issued a firm warning about possible intervention in foreign exchange markets.
The dollar slipped during thin holiday trading, with investors closely watching upcoming U.S. gross domestic product and personal consumption expenditures (PCE) inflation data scheduled for later in the day. These releases are expected to influence expectations for U.S. interest rate policy heading into 2026.
Trading activity across Asia remained subdued due to year-end holidays. Despite lighter volumes, most regional currencies are still holding annual gains against the dollar. The Japanese yen, meanwhile, has remained broadly flat against the greenback in 2025 after experiencing significant volatility earlier in the year.
Yen strengthens on intervention warning
The yen posted notable gains on Tuesday, with the USD/JPY pair falling around 0.5%. The move followed comments from Japan’s finance minister, who warned that recent currency movements were being driven by speculation rather than economic fundamentals.
Officials stressed that the government stands ready to take appropriate action to counter excessive volatility in the currency market. This marked Tokyo’s strongest warning so far against aggressive bets weakening the yen and triggered renewed fears of official dollar selling.
Japan has previously intervened in currency markets when the dollar traded in the 155 to 160 yen range, reinforcing expectations that authorities could act again if volatility accelerates.
Dollar weakens ahead of GDP and PCE data
The U.S. dollar index and related futures slipped nearly 0.2% in Asian trading, extending losses from a muted session earlier in the week. The decline reflects growing caution ahead of delayed U.S. economic data releases.
Third-quarter GDP figures are expected to show slower economic growth compared to the previous quarter. Meanwhile, PCE inflation data — the preferred inflation gauge of the Federal Reserve — is forecast to show that price pressures remain sticky.
Analysts caution that data for October and November may have been distorted by the earlier government shutdown, placing greater importance on December readings when assessing the outlook for interest rates.
Markets currently expect the Fed to keep rates unchanged in January, though longer-term expectations still point toward gradual rate cuts.
Asian currencies gain broadly
A softer dollar supported gains across most Asian currencies. The Chinese yuan edged higher, while the Australian dollar rose modestly. The Taiwan dollar and Singapore dollar also advanced slightly against the greenback.
The Indian rupee weakened marginally but remained below the record lows seen earlier in December, when the currency briefly traded above 90 per dollar.
