Most Asian currencies drifted lower on Monday as the dollar remained steady after logging some gains last week, while threats of government intervention helped the Japanese yen recover mildly from recent losses.
Regional markets showed little reaction to the People’s Bank of China leaving a benchmark interest rate unchanged as widely expected.
Risk appetite was dampened by increased geopolitical tensions between the U.S. and Venezuela, while markets were also on guard over renewed hostilities between Israel and Iran.
The dollar found some strength in recent sessions as soft inflation data was insufficient in convincing markets that the Federal Reserve will cut interest rates further in the near-term. Focus is squarely on December’s inflation data, which analysts said will have greater bearing on interest rates.
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Japanese yen firms slightly on intervention threats The Japanese yen’s USD/JPY pair fell 0.2% to around 157.45 yen, but remained close to levels last seen in January.
Monday’s strength in the yen came shortly after Japan’s top currency diplomat, Atsushi Mimura, warned that authorities would take “appropriate” action against excessive volatility in foreign exchange markets.
The yen steadily weakened in recent weeks, amid growing concerns over Japan’s fiscal health and a worsening diplomatic spat with China.
An interest rate hike and hawkish rhetoric from the Bank of Japan last week did little to stem the yen’s decline, with markets also disappointed by a lack of clear policy cues from the central bank.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. “Near term risks may still be skewed towards JPY weakening… the BOJ policy normalisation pace remains slow and concerns over fiscal expansion are some factors that may undermine JPY in the interim,” OCBC analysts wrote in a note.
Asia FX weak as dollar recovers some ground Broader Asian currencies moved in a flat-to-low range on Monday, with trading volumes also seen weakening with the year-end holidays. Regional currencies were pressured by some resilience in the dollar, which rose over the past week.
The dollar index and dollar index futures were mildly positive in Asian trade on Monday.
The Chinese yuan’s USD/CNY pair was flat after the PBOC left its benchmark loan prime rate unchanged, as widely expected. But the central bank is expected to further trim rates in 2026 to support lagging economic growth.
The Singapore dollar’s USD/SGD pair was flat, as was the Taiwan dollar’s USD/TWD. The South Korean won’s USD/KRW rose 0.4%.
The Australian dollar’s AUD/USD pair was an outlier, rising 0.2%. The Indian rupee’s USD/INR pair rose 0.3%, having recovered from record highs of over 90 rupees hit last week.
