Most Asian currencies retreated on Monday as U.S. action against Venezuela kept markets on edge, while the Japanese yen weakened even as the Bank of Japan flagged more interest rate hikes.
The dollar benefited from increased haven demand after Washington attacked Venezuela and captured President Nicolas Maduro. U.S. President Donald Trump said the U.S. will control Venezuela until a new leader is elected.
The Chinese yuan was an outlier, remaining heady at its strongest level in 2-½ years after Beijing announced more stimulus measures in late-December. Middling services activity data also did little to deter the yuan’s advance, following a series of strong midpoint fixes from the People’s Bank.
Dollar benefits from haven demand after Venezuela action The dollar index and dollar index futures both rose about 0.3% each in Asian trade, with the greenback seeing increased haven demand in the face of heightened geopolitical uncertainty.
The U.S. over the weekend was seen transporting Maduro to New York, where he is likely to face legal action.
Trump threatened action against other countries at odds with U.S. policy, including Colombia and Iran. He also reiterated his calls for a U.S. takeover of Greenland.
The military action, coupled with Trump’s comments, ramped up uncertainty over global geopolitics. Analysts also warned that Washington’s actions could set a precedent for other global superpowers, specifically China and Russia.
Japanese yen weakens further despite BOJ rate hike chatter The Japanese yen weakened further on Monday, with the USD/JPY pair rising 0.2% and remaining close to levels last seen in early-2025.
Weakness in the yen persisted even as BOJ Governor Kazuo Ueda said the central bank will continue raising interest rates as the economy and inflation move in line with its forecasts.
But Ueda’s comments largely reiterated his messaging from the BOJ’s December meeting, where the central bank raised rates by 25 basis points.
The yen remained squarely on the backfoot, with USDJPY also trading within ranges that have attracted government intervention in the past. But traders questioned just how much headroom Tokyo has to intervene further in currency markets, amid rising concerns over stretched fiscal spending in the country.
Chinese yuan at 2-½ yr high on stimulus cheer The Chinese yuan was an outlier, with the USD/CNY pair extending recent losses and falling 0.2%. The pair was also at its lowest level since May 2023.
Strength in the yuan was sparked by Beijing outlining plans for more stimulus measures aimed at boosting consumer spending. The government announced a 62.5 billion yuan ($8.94 billion) program to extend its subsidies on consumer electronics and other goods in late-December.
China was also seen moving to shore up the yuan, with the PBOC setting a series of strong daily midpoints for the currency.
