Asian currencies traded without a clear direction on Wednesday, as markets reacted to diverging regional developments. The Japanese yen held steady despite a sharp sell-off in Japanese government bonds, while the South Korean won rebounded strongly and the Indian rupee slid to fresh record lows.
The US dollar remained under pressure, with the US Dollar Index hovering near two-week lows after extending a 0.8% decline in the previous session. Investor sentiment weakened following renewed geopolitical and trade concerns, after Donald Trump revived rhetoric around Greenland and hinted at possible tariffs on European allies, sparking a broader “Sell America” response across global markets.
US Dollar Index futures were last seen down 0.1% at 05:21 GMT.
Yen steadies as JGB sell-off dominates focus
In Japan, the yen stabilized after experiencing sharp volatility earlier in the week, with the USD/JPY pair remaining under pressure amid a steep sell-off in Japanese government bonds (JGBs). Long-dated bonds were hit particularly hard, with yields on 40-year JGBs surging to record highs.
The bond rout reflects growing investor unease over Japan’s fiscal outlook under new Prime Minister Sanae Takaichi, whose expansionary agenda includes proposals such as suspending the national sales tax on food. Weak demand at recent bond auctions, combined with fears of widening budget deficits and Japan’s already substantial debt load, has intensified selling across the sovereign market.
Adding to uncertainty, Takaichi announced a snap election scheduled for February 8, seeking a stronger mandate to advance her economic policies.
Across the region, Asian currencies reacted unevenly as traders weighed Japan’s fiscal risks against a softer US dollar.
Rupee sinks to record low as won rebounds
The Indian rupee weakened further, with the USD/INR pair rising 0.3% to a record high of 91.38. The currency remains under pressure from persistent capital outflows and elevated global trade tensions.
In contrast, the South Korean won posted a sharp rebound. The USD/KRW pair fell around 0.8% to 1,468.90 after comments from President Lee Jae Myung, who said authorities expect the won to strengthen toward the 1,400-per-dollar level within the next one to two months. However, he cautioned that domestic policy actions alone may not be sufficient to fully stabilize foreign exchange markets.
Elsewhere, the Chinese yuan was largely unchanged, with the onshore USD/CNY steady and the offshore USD/CNH edging 0.1% higher. The Singapore dollar traded flat, while the Australian dollar saw modest gains, with AUD/USD up 0.1% on the day.
