Most Asian currencies moved slightly lower on Thursday as the U.S. dollar firmed modestly, supported by easing geopolitical and trade tensions linked to Greenland. In contrast, the Australian dollar surged to a 15-month high after the release of stronger-than-expected domestic employment data.
The U.S. Dollar Index, which tracks the greenback against a basket of major global currencies, edged higher after gaining 0.1% in the previous session. Meanwhile, U.S. Dollar Index futures were largely unchanged in early European trading hours.
Trump eases tariff tensions over Greenland
U.S. President Donald Trump dialed back earlier tariff threats on Wednesday that were tied to his renewed push to acquire Greenland, while also ruling out the use of military force. Trump said a framework agreement could be achievable, helping to calm investor concerns that had previously boosted demand for safe-haven assets.
This softer stance helped stabilise broader financial markets and reduced pressure on the U.S. dollar. Still, the greenback remained supported overall, prompting Asian currencies to weaken slightly as traders adjusted positions and reassessed regional monetary and fiscal outlooks.
Japanese yen weak amid snap election uncertainty
The Japanese yen stayed under pressure, with USD/JPY rising 0.3% and hovering near 18-month lows. Investor focus remained on Prime Minister Sanae Takaichi’s calls for a snap election and her signals toward expansionary fiscal policy.
Analysts at MUFG warned that proposals to suspend the 8% consumption tax on food and non-alcoholic beverages for two years have raised concerns over wider deficit financing. Despite Japan’s stated commitment to fiscal discipline and the possibility of FX intervention, the yen is expected to remain weak amid political uncertainty and a steeper Japanese government bond yield curve.
Elsewhere, the South Korean won weakened, with USD/KRW up 0.3%, while USD/SGD was little changed. The Indian rupee traded flat at 91.58 per dollar, staying close to the previous session’s record low of 91.63. In China, the onshore yuan was broadly steady against the dollar.
Aussie dollar hits 15-month high on strong jobs data
The Australian dollar outperformed its regional peers, with AUD/USD jumping 0.8% to its highest level in 15 months. The move followed data showing Australia’s labour market expanded far more than expected in December.
Employment rose by 65,200 jobs, significantly beating forecasts, while the unemployment rate fell to 4.1%, defying expectations of a modest increase. The strong report reinforced market expectations that the Reserve Bank of Australia could raise interest rates as early as its February meeting, with traders pricing in a higher probability of a near-term rate hike.
