Most Asian currencies traded within narrow ranges on Friday, while the Japanese yen clawed back part of its weekly losses ahead of a closely watched national election this weekend.
A stronger U.S. dollar, combined with subdued risk appetite, continued to pressure regional currencies. Markets were also assessing the outlook for U.S. monetary policy under President Donald Trump’s nominee for Federal Reserve chair, Kevin Warsh.
That said, a series of weaker-than-expected U.S. labor market reports weighed on the dollar later in the session, offering some relief to Asian currencies.
The Indian rupee strengthened slightly after the Reserve Bank of India left interest rates unchanged at 5.25%, as widely expected, while raising its inflation forecasts for the coming quarters.
Yen stabilizes ahead of Japan election
The Japanese yen edged higher on Friday, with USD/JPY slipping about 0.3%, though the pair remained up roughly 1.2% for the week.
Investor attention is firmly focused on Sunday’s lower house election in Japan, where opinion polls suggest Prime Minister Sanae Takaichi’s conservative party is on track for a decisive victory.
A stronger parliamentary majority would give Takaichi more flexibility to pursue expansionary fiscal policies, including tax cuts and higher government spending. However, concerns about Japan’s elevated debt levels have weighed heavily on bond markets in recent weeks, as rising borrowing costs fuel fears of longer-term fiscal stress.
These concerns had previously driven sharp yen weakness, with past threats of currency intervention providing only temporary support. USD/JPY remains above levels that previously prompted official action.
Dollar eases but still set for weekly gains
The dollar index slipped modestly on Friday, as its recent rebound lost momentum following a string of soft U.S. labor data.
Challenger figures showed U.S. job cuts in January rose at the fastest pace since the 2009 financial crisis. Weekly jobless claims also climbed more than expected, while December job openings fell short of forecasts.
Signs of a cooling labor market increased expectations for future Federal Reserve rate cuts, putting pressure on the greenback. Still, uncertainty around Fed policy under Warsh — who is viewed as less dovish — continued to provide underlying support to the dollar, keeping it on track for solid weekly gains.
Asian currencies see limited weekly movement
Elsewhere in Asia, currencies posted modest gains on Friday but were headed for a subdued week overall.
The Chinese yuan was a notable outperformer, with USD/CNY edging lower and extending its longest weekly winning streak against the dollar in nearly 13 years. The pair is on track for an eleventh straight weekly decline, supported by consistently strong midpoint fixings from the People’s Bank of China.
The Australian dollar rose about 0.3% after hawkish comments from Reserve Bank of Australia Governor Michele Bullock boosted expectations of further rate hikes, following a 25-basis-point increase earlier this week.
Meanwhile, the Singapore dollar strengthened slightly, while the South Korean won also advanced against the U.S. dollar.
