Most Asian currencies traded in narrow ranges on Monday as a broader risk-off mood limited price moves, following fresh U.S. tariff threats against Europe. Investors also assessed slightly stronger-than-expected economic growth data from China, which helped cushion sentiment.
The U.S. dollar eased modestly in Asian hours, with the dollar index slipping 0.2% from a seven-week high. Dollar index futures were also lower, down around 0.3% by 03:58 GMT.
Yuan strengthens after China Q4 growth beats expectations
China provided some support to regional markets after data showed the world’s second-largest economy expanded slightly faster than forecast in the fourth quarter. The stronger reading allowed China to meet its official 5% growth target for 2025, offering reassurance on regional growth momentum despite ongoing concerns around weak domestic demand and stress in the property sector.
Following the data, the onshore yuan strengthened, with the USD/CNY pair slipping 0.1% to its lowest level since May 2023.
Asian FX steady after Trump Greenland tariff threat
Risk appetite deteriorated after U.S. President Donald Trump said Washington would impose tariffs on eight European countries that have opposed his plan for the United States to acquire Greenland.
Trump said a 10% tariff would take effect from February 1, rising to 25% in June if no agreement is reached. The announcement revived fears of escalating transatlantic trade tensions and potential spillover effects across global markets.
Media reports indicated the European Union may pause progress on an EU-U.S. trade agreement and could revive a previously proposed €93 billion tariff package targeting American goods. France has also urged the bloc to consider deploying its anti-coercion instrument, a powerful mechanism designed to counter economic pressure from third countries.
In Asian foreign exchange markets, most currencies remained rangebound as traders avoided taking aggressive positions. The South Korean won weakened slightly, with USD/KRW edging up 0.1%, while the Singapore dollar strengthened as USD/SGD slipped 0.2%. The Indian rupee traded largely unchanged, while the Australian dollar rose 0.1%.
Japanese yen firms as election risks draw attention
The Japanese yen strengthened against the dollar, with USD/JPY falling 0.2% to a 10-day low, supported by safe-haven demand amid heightened global trade uncertainty.
Domestic politics in Japan also remained in focus, following reports that Prime Minister Sanae Takaichi is considering calling a snap election in the coming weeks to reinforce her political mandate.
Analysts at MUFG said election uncertainty is likely to weigh on the yen in the near term, with clearer direction expected after February. They added that, over the medium term, the yen remains undervalued and could strengthen further depending on how the political landscape evolves.
