Most Asian currencies drifted lower on Thursday as the dollar firmed in anticipation of major central bank meetings in Europe and the UK, while a broader rout in global financial markets also kept traders averse towards risk-driven currencies.
Focus was also on a Reserve Bank of India meeting on Friday, with the rupee trading strong after a long-awaited trade deal between India and the United States.
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Japanese yen weak ahead of elections, Chinese yuan steady The Japanese yen remained on the backfoot on Thursday, with the USD/JPY pair rising 0.1% and coming close to 157 yen.
Focus was squarely on upcoming lower house elections this weekend, with Prime Minister Sanae Takaichi’s party set to gain a larger majority– opening the door for more fiscal spending from Tokyo.
Concerns over Japan’s stretched fiscal burden had battered the yen in recent weeks, with losses exacerbated by Takaichi also downplaying weakness in the currency.
The Chinese yuan’s USD/CNY pair rose slightly, although the currency remained at its strongest level in nearly three years.
The yuan firmed following a series of strong midpoint fixes by the People’s Bank, with the USDCNY pair now trading comfortably below the 7 yuan level– a key psychological point for the Chinese government.
Other Asian currencies mostly weakened on Thursday. The Australian dollar’s AUD/USD pair fell 0.3%, falling back below $0.7 after two days of strong gains on a hawkish Reserve Bank.
The Indian rupee’s USD/INR pair steadied around 90.4 rupees, with the RBI widely expected to leave interest rates unchanged at 5.25%, amid growing uncertainty over the Indian economy.
While the USDINR pair did fall sharply from recent record highs after New Delhi and Washington agreed to a trade deal this week, analysts expect the pair to remain above 90 rupees in the near-term.
The South Korean won’s USD/KRW pair rose 0.1%, as did the Singapore dollar’s USD/SGD pair.
The Taiwan dollar’s USD/TWD pair rose slightly, with a rout in local technology stocks pressuring the currency.
Dollar strong with ECB, BOE meetings in focus The dollar index and dollar index futures rose around 0.1% each in Asian trade.
The greenback firmed against the British pound and the euro ahead of interest rate decisions by the Bank of England and the European Central Bank later in the day.
Both central banks are widely expected to leave interest rates unchanged, with no major changes on tap amid heightened market volatility across the globe.
The dollar extended its rebound from near four-year lows after markets viewed Kevin Warsh, President Donald Trump’s nominee for the next Federal Reserve chair, as less dovish than initially expected.
While Warsh supports Trump’s calls for lower rates, he was also seen criticizing the Fed’s asset buying program– a trend that could see long-term U.S. monetary conditions turning tighter than expected.
