Most Asian currencies moved in a tight range on Wednesday as the dollar steadied after a strong run-up over the past week, while the Japanese yen lagged ahead of a snap election in the coming days.
Regional markets were still digesting U.S. President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair and what his potential appointment will mean for interest rates.
The Indian rupee remained upbeat after a U.S.-India trade deal this week, while the Australian dollar held on to sharp gains from Tuesday after the Reserve Bank raised interest rates and presented a hawkish stance.
Japanese yen near 2-wk low as snap election looms The Japanese yen’s USD/JPY pair rose nearly 0.4% on Wednesday, and was close to its highest level in nearly two weeks.
The yen came under renewed pressure this week after comments from Prime Minister Sanae Takaichi raised questions over whether Tokyo will intervene in currency markets to support the yen.
Focus is now squarely on a snap lower house election scheduled for February 8, with Takaichi’s party poised to score a strong victory and give her a greater grip on Japan’s parliament.
A strong majority gives Takaichi more headroom to carry out her expansionary fiscal plans– questions over which had been a major weight on the yen in recent months.
Traders grew increasingly concerned that Takaichi’s spending plans will further increase Japan’s already high government debt levels– a notion that sparked a rout in Japanese government bonds and pressured the yen.
Dollar steadies after rebound; more rate cues awaited The dollar index and dollar index futures moved little in Asian trade on Wednesday, steadying after rebounding sharply from recent four-year lows.
A brief government shutdown appeared to have had little bearing on the dollar, as policymakers approved more government funding this week.
The greenback had surged after Warsh’s nomination, with the candidate seen as less dovish than markets were expecting.
But markets were now watching to see whether Warsh will be confirmed by the Senate, and just what his appointment could mean for U.S. interest rates. Incumbent Fed Chair Jerome Powell’s term ends in May.
Focus this week is on more key U.S. economic readings, chiefly nonfarm payrolls data for January.
Among Asian currencies, the Indian rupee’s USD/INR pair steadied around the low-90 rupee levels, after falling sharply from recent record highs on a U.S.-India trade deal. Focus this week is on a Reserve Bank of India meeting on Friday.
The Australian dollar’s AUD/USD pair remained upbeat after rallying on a hawkish RBA meeting on Tuesday.
The South Korean won’s USD/KRW pair rose 0.1%, while the Chinese yuan’s USD/CNY pair steadied close to its lowest level since mid-2023.
The Singapore dollar’s USD/SGD pair rose 0.2%, while the Taiwan dollar’s USD/TWD pair was flat.
