Asian Currencies Steady as Traders Eye BOJ, Trump–Xi Talks; Dollar Slips After Fed Signals
Most Asian currencies traded in a narrow range on Thursday as investors weighed mixed messages from the Federal Reserve, while the Japanese yen weakened after the Bank of Japan (BOJ) kept interest rates unchanged and reaffirmed its cautious policy stance.
Markets found limited direction following a much-anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping. The discussion offered little clarity on how the two economic powers plan to ease ongoing trade tensions.
The U.S. dollar slipped slightly during Asian trading hours, facing profit-taking after a sharp overnight rally. While the Federal Reserve did cut rates as expected, it also downplayed the possibility of another cut in December amid rising uncertainty about the U.S. economy.
Chinese Yuan Retreats After Trump–Xi Meeting
The Chinese yuan (USDCNY) reversed early losses to trade 0.1% higher at 7.1022 yuan per dollar, retreating from its strongest level in a year after the Trump–Xi meeting in South Korea.
Following the talks, President Trump told reporters that a trade deal with China could come “pretty soon,” adding that both sides reached agreements on rare earths and agriculture. He also announced that the U.S. would halve its fentanyl-related tariff on China to 10%, effectively lowering the overall tariff rate from 57% to 47%.
Despite the positive tone, Trump offered few concrete details on the timeline or framework for resolving the U.S.–China trade conflict, though he confirmed plans to visit China in April.
The People’s Bank of China (PBOC) has continued to support the yuan amid trade pressures, aiming to bolster exports with a stronger currency. Promises of additional economic stimulus from Chinese policymakers have also boosted market sentiment.
Japanese Yen Weakens as BOJ Holds Rates
The Japanese yen (USD/JPY) fell 0.2% after the BOJ decided to leave interest rates unchanged and warned of increased economic uncertainty. The yen had already declined overnight following the Fed’s meeting.
In its statement, the Bank of Japan maintained an accommodative stance but noted it could raise rates if economic growth and inflation move in line with forecasts. The central bank slightly adjusted its growth and inflation projections for 2025 and 2026, while acknowledging ongoing political resistance to tighter policy.
The yen had weakened earlier in the week after the election of Prime Minister Sanae Takaichi, whose dovish fiscal approach fueled expectations of extended loose monetary conditions.
BOJ Governor Kazuo Ueda is expected to address Japan’s shifting economic environment and future policy direction in a post-meeting press conference.
Dollar Eases as Markets Digest Fed Moves
The U.S. dollar index and futures both slipped about 0.2% in Asian trade after rallying nearly 0.6% overnight. The greenback’s earlier gains came from the Fed’s decision to cut rates by 25 basis points while signaling less confidence in another cut this year.
That stance added uncertainty to the outlook for U.S. monetary policy, especially amid concerns about a prolonged government shutdown.
Across the region, most Asian currencies remained subdued. The Singapore dollar (USD/SGD) edged 0.1% lower, while the Taiwan dollar (USD/TWD) ticked up 0.1%. The South Korean won (USD/KRW) rose 0.4% after Seoul and Washington signed a new trade agreement.
Elsewhere, the Australian dollar (AUD/USD) gained 0.3% following hotter-than-expected inflation data, which reduced expectations for more rate cuts by the Reserve Bank of Australia (RBA). The Indian rupee (USD/INR) traded flat near 88 per dollar, hovering close to record lows.
