Most Asian currencies drifted lower on Friday as traders adopted cautious positioning ahead of U.S. consumer price index data for January, which is due later in the day. The dollar, after modest gains in Asian trade, held a steadier posture as market participants weighed the implications of the U.S. inflation release for near-term interest-rate expectations.
Even with Friday's softer tone, the majority of regional currencies were set to finish the week with gains, while the dollar was on track to record weekly losses amid renewed uncertainty over the U.S. monetary policy outlook.
Yen tops weekly performers amid intervention chatter
The Japanese yen emerged as one of the week's strongest Asian currencies. The USD/JPY rate rose 0.2% on Friday, but was down roughly 2.6% for the week - its best weekly showing since November 2024. Market participants attributed much of the yen's advance to a fresh round of hawkish-sounding comments from Japanese officials about the prospect of intervention in currency markets. Those remarks helped investors look past concerns tied to stretched fiscal spending under Prime Minister Sanae Takaichi.
Other regional moves
- Australian dollar: The AUD/USD pair was among the top performers this week, up about 1% and trading at a three-year high after a series of hawkish remarks from the Reserve Bank.
- South Korean won: The USD/KRW pair was down about 1.4% for the week. Observers linked the won's strength to increased capital inflows into South Korean equities, as investors bought into chip stocks with exposure to the artificial intelligence theme.
- Chinese yuan: USD/CNY ticked up slightly on Friday but was down roughly 0.4% for the week, following several strong midpoint fixes by the People’s Bank of China. The yuan also remained close to a near three-year high reached earlier in the week.
- Indian rupee and Singapore dollar: The USD/INR was essentially flat for the week, while USD/SGD finished down about 0.6%.
Dollar steadies, focus on CPI
The dollar index and related futures edged higher in Asian trading on Friday as investors focused on the upcoming CPI release for January. Consensus expectations pointed to a modest easing in both headline and core inflation, yet traders remained cautious about the possibility of a hawkish surprise - particularly given a pattern of January CPI prints beating estimates in recent years.
Earlier in the week, the dollar received some support from stronger-than-expected U.S. nonfarm payrolls for January, but despite that boost the greenback was still down about 0.7% on the week. The currency also faced pressure from growing uncertainty around U.S. monetary policy, a dynamic intensified by the nomination of Kevin Warsh as the next Chair of the Federal Reserve.
Market participants will be watching the CPI figures closely for indications on how quickly inflation is cooling and what that could mean for the path of interest rates. The readings could influence flows into regional currencies and risk-sensitive assets in the days ahead.