Major foreign exchange pairs traded mixed on Wednesday, with Asian currencies drawing the most attention. The South Korean won surged after authorities signaled new measures to stabilize the currency, while the Japanese yen extended its recovery on hawkish central bank signals. The Australian dollar also advanced as expectations for future rate hikes continued to build.
Yen extends rebound on intervention signals
The Japanese yen continued its recent rebound after Finance Minister Satsuki Katayama pointed to the possibility of foreign-exchange intervention to address the currency’s recent weakness. Her remarks reinforced market speculation that authorities are prepared to act if moves become excessive.
According to Société Générale strategist Kit Juckes, sharp currency moves that are disconnected from economic fundamentals, combined with thin year-end liquidity, create a strong case for intervention. He added that the likelihood of action during the holiday period should not be underestimated.
Juckes also noted that while gains in dollar-yen have been significant, advances in euro-yen have been even more pronounced in recent weeks.
At the time of writing, USD/JPY was down 0.3% at 155.80, retreating from a 10-month high of 157.89 reached last month. EUR/USD was largely unchanged, trading around 1.1800 in early European hours.
Dollar pressured near multi-week lows
The U.S. Dollar Index remained under pressure near an 11-week low as investors maintained expectations for Federal Reserve rate cuts in 2026. This outlook persisted despite data showing robust U.S. economic growth, highlighting the market’s focus on easing inflation trends rather than headline growth figures.
Won jumps on government support measures
The South Korean won outperformed its regional peers, posting sharp gains after the finance ministry signaled strong determination to stabilize the currency. Officials said foreign-exchange markets would soon see concrete actions aimed at reducing volatility.
The USD/KRW pair dropped 2.2% to 1,446.70, marking its lowest level in a month. Authorities also announced new tax measures designed to encourage domestic investment flows and help smooth sharp currency swings.
Additional support came from reports that the National Pension Service had begun strategic currency hedging. The move is widely viewed as helping to curb dollar demand and ease pressure on the won after weeks of sustained weakness.
Yen gains after hawkish BOJ minutes
In Japan, the yen found further support after minutes from the Bank of Japan’s latest policy meeting revealed active discussions around the need for additional interest rate hikes. The debate strengthened expectations that the BOJ may continue its gradual policy normalization, supporting the currency even as officials reiterated their readiness to respond to excessive exchange-rate moves.
Australian dollar hits fresh highs
The Australian dollar edged higher, with AUD/USD rising 0.2% to above a one-year high. Traders increased bets that the Reserve Bank of Australia could raise interest rates later next year, following resilient domestic economic data and firmer guidance from policymakers.
A softer U.S. dollar also provided additional tailwinds for the currency.
Markets cautious amid thin liquidity
Elsewhere, Asian currencies traded in narrow ranges as holiday-thinned liquidity limited trading activity across regional markets. Investors remained cautious, focusing on central bank outlooks and potential policy shifts heading into the new year.
