Asian currencies edged lower on Friday as the U.S. dollar steadied, with traders closely monitoring upcoming U.S. consumer price index (CPI) data for signals on the Federal Reserve’s interest rate outlook. Despite the daily pullback, most regional currencies remained on track for weekly gains, while the dollar faced overall weekly losses amid growing uncertainty surrounding U.S. monetary policy.
The Japanese yen emerged as the top-performing Asian currency this week, supported by renewed speculation of government intervention in the foreign exchange market. Although the USD/JPY pair rose 0.2% on Friday, it was down roughly 2.6% for the week, marking its strongest weekly performance since November 2024. Hawkish remarks from Japanese officials boosted the yen, helping investors overlook fiscal concerns tied to Prime Minister Sanae Takaichi’s spending policies.
The Australian dollar also posted strong gains, with AUD/USD climbing 1% and reaching a three-year high after firm signals from the Reserve Bank of Australia suggested a tighter monetary policy stance. Meanwhile, the South Korean won strengthened, with USD/KRW falling 1.4% this week, driven by increased foreign inflows into domestic equity markets, particularly chip stocks benefiting from the artificial intelligence boom.
China’s yuan saw modest movement, as USD/CNY edged higher on Friday but remained down 0.4% for the week. Support came from consistent midpoint fixes by the People’s Bank of China, keeping the currency near a three-year high. The Indian rupee traded flat for the week, while the Singapore dollar gained ground, with USD/SGD down 0.6%.
The U.S. dollar index ticked up slightly in Asian trading ahead of January inflation data. Although headline and core CPI are expected to show mild easing, investors remain cautious after stronger-than-expected nonfarm payrolls data earlier this week. The dollar remains pressured, particularly following Kevin Warsh’s nomination as the next Federal Reserve Chair, adding further uncertainty to the U.S. interest rate trajectory.


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