Most Asian currencies were higher on Thursday led by gains in the Japanese yen, as the U.S. dollar was slightly weaker amid uncertainty around new tariff threats from U.S. President Donald Trump and the Federal Reserve's rate outlook.
The US Dollar Index fell 0.2% in Asia hours, while Dollar Index Futures also edged lower.
Japanese yen jumps as investors assess Fed meeting minutes, Trump tariff threats
Trump's recent announcement of impending tariffs on automobile, semiconductor, and pharmaceutical imports has heightened market caution.
Meanwhile, the Fed released the minutes from its January 28–29 meeting, revealing a cautious stance among officials due to potential inflationary pressures arising from recent U.S. trade and immigration policies.
The discussions highlighted concerns that Trump's proposed tariffs could disrupt global supply chains, leading to increased costs and elevated inflation.
The ambiguity around Trump's plans has heightened their hesitation to implement rate cuts in 2025.
The Japanese yen appreciated 0.6% against the U.S. dollar, with the USD/JPY pair trading at 150.52 yen, as investors sought safe-haven assets amid potential trade disruptions.
The Chinese yuan’s onshore pair USD/CNY was largely unchanged, while the offshore pairUSD/CNH inched 0.2% lower.
The Indian rupee’s USD/INR pair edged down 0.1%, while the Thai baht's USD/THB was trading 0.3% lower.
Aussie dollar gains on strong jobs data; supported by hawkish RBA
The Australian dollar's AUD/USD strengthened 0.3% following the release of robust employment data for January 2025.
The economy added 44,000 jobs, surpassing expectations, while the unemployment rate edged up to 4.1%.
This was attributed to a record-high participation rate of 67.3%.
Earlier this week, the Reserve Bank of Australia reduced the cash rate by 25 basis points to 4.10% but maintained a hawkish outlook due to persistent inflation concerns.
The combination of strong labor market performance reflected that the economy was still strong, backing the central bank's stance, and bolstering confidence in the Australian currency.
Bank of Korea expected to cut rates next week
The South Korean won’s USD/KRW pair inched 0.2% lower, ahead of the Bank of Korea’s interest rate decision due next week.
“With the FX market stabilising and concerns about slowing growth intensifying, we expect the Bank of Korea to resume rate cuts next week. But inflation worries persist as trade war risks increase,” ING analysts said in a note.
“The political turmoil in Seoul that triggered excessive KRW weakness has abated since January’s policy meeting,” they added.
Source: Investing