Most Asian currencies moved lower Thursday, pressured by a firmer U.S. dollar and a wider rout across global financial markets that left traders reluctant to hold risk-sensitive FX positions. The backdrop included major central bank meetings in Europe and the United Kingdom later in the day, which helped underpin the greenback.
Regional dynamics and headline events
Market attention in Asia extended to a Reserve Bank of India meeting scheduled for Friday. The Indian rupee was trading relatively firm after New Delhi and Washington reached a long-awaited trade agreement earlier in the week, although the USD/INR pair remained around 90.4 rupees as the RBI was broadly expected to keep policy rates unchanged at 5.25% amid questions about the wider health of the Indian economy.
Elsewhere, the Japanese yen stayed under pressure. USD/JPY moved up around 0.1%, approaching the 157 yen level as investors weighed the impact of upcoming lower house elections. Prime Minister Sanae Takaichi’s party is positioned to increase its parliamentary majority, a development the market sees as opening the door to expanded fiscal spending from Tokyo. Concerns about Japan’s already stretched fiscal burden contributed to recent yen losses, and those moves were amplified by comments from Takaichi that downplayed the significance of the currency’s weakness.
The Chinese yuan held firm. The USD/CNY rate ticked higher slightly but remained at the currency’s strongest level in nearly three years after a sequence of strong midpoint fixes by the People’s Bank of China. The USDCNY pair was trading comfortably below the 7 yuan mark, a psychological threshold closely watched by Chinese authorities.
Other regional currencies and markets
Across other Asian FX, declines were more widespread. The Australian dollar weakened, with AUD/USD falling about 0.3% and sliding back under $0.70 following two days of gains in response to a hawkish Reserve Bank of Australia. The South Korean won and Singapore dollar both eased, with USD/KRW and USD/SGD each rising about 0.1% in Asian trading. The Taiwan dollar also saw modest losses, with USD/TWD edging higher as a rout in local technology stocks applied additional pressure to the currency.
In India, while the USD/INR pair fell sharply from recent record highs in the wake of the India-U.S. trade deal, analysts in the market expected the pair to remain above 90 rupees in the near term.
Dollar dynamics and policy focus
The dollar index and associated futures gained approximately 0.1% each in Asian trade, supported by cautious positioning ahead of interest-rate announcements from the Bank of England and the European Central Bank. Both central banks were widely expected to leave policy rates unchanged, with markets anticipating no major moves amid elevated global volatility.
Recent developments in U.S. monetary policy debate also helped the dollar rebound from near four-year lows. Markets reassessed expectations after Kevin Warsh, the nominee for the next Federal Reserve chair, was perceived as less dovish than initially thought. Although Warsh has voiced support for calls to lower rates, he has also criticized the Fed’s asset-purchase program, a stance that market participants interpreted as potentially leading to tighter-than-expected longer-term U.S. monetary conditions.
Finally, attention will shift to U.S. labour market data in the coming week. The U.S. nonfarm payrolls report for January, originally slated for Friday, was delayed to February 11 following a partial government shutdown earlier in the week.