Most Asian currencies traded within a narrow range on Friday, as the U.S. dollar strengthened ahead of the release of closely watched U.S. nonfarm payrolls data later in the session.
The Japanese yen underperformed regional peers despite better-than-expected household spending figures, while the Chinese yuan remained largely unchanged after upbeat inflation data for December.
Overall, Asian currencies moved between flat and slightly lower levels, as investors turned cautious ahead of the payrolls report, which is expected to shape longer-term expectations for U.S. interest rates.
Beyond economic data, elevated geopolitical risks also weighed on sentiment. Ongoing diplomatic tensions between China and Japan showed little sign of improvement, while markets also remained focused on the recent U.S. incursion in Venezuela.
Chinese Yuan Supported by Strong December CPI
The Chinese yuan edged firmer, with the USD/CNY pair slipping nearly 0.1% and holding close to its lowest level in more than two and a half years.
Data showed that consumer price inflation climbed to its strongest reading in almost three years in December, supported by recovering private consumption and rising food costs. Producer price inflation also eased at a slower pace than expected, offering some relief from concerns over persistent deflation.
However, analysts at Capital Economics cautioned that much of the CPI increase was driven by seasonal factors, warning that underlying deflationary pressures in China have not disappeared.
“Without stronger measures to boost demand, excess capacity and deflationary forces are likely to remain in the coming years,” the analysts said.
Beijing is widely expected to introduce additional stimulus measures in 2025, as policymakers attempt to reinforce growth following a prolonged post-pandemic slowdown.
Dollar Steadies Ahead of Nonfarm Payrolls
The U.S. dollar index and dollar futures stabilized on Friday after posting gains earlier in the week, as traders positioned themselves ahead of the key labor market release.
The upcoming nonfarm payrolls report is forecast to show modest job growth in December. The outcome is expected to influence the policy outlook of the Federal Reserve, with signs of labor market resilience potentially reducing the urgency for further interest rate cuts.
Earlier private payroll data delivered mixed signals, keeping investors cautious while awaiting clearer direction from the official employment figures.
Asian currencies largely reflected this uncertainty, trading in subdued ranges ahead of the release.
The Japanese yen lagged, with USD/JPY climbing about 0.3% to move back above the 157 level. While household spending unexpectedly rose in November, supporting inflation expectations, weaker wage data released earlier limited optimism around Japan’s economic outlook. Renewed trade and diplomatic pressures from China also weighed on sentiment.
Elsewhere, the Taiwan dollar weakened, with USD/TWD up 0.3%, while USD/SGD rose nearly 0.1% against the Singapore dollar. The South Korean won was among the region’s weakest performers, with USD/KRW up 0.2% on the day and nearly 0.9% for the week.
The Australian dollar edged lower, while the Indian rupee remained steady, with USD/INR hovering just below the 90 mark.
