Most Asian currencies firmed on Tuesday, tracking an overnight slide in the dollar as a recent rebound in the greenback stalled before a swathe of key economic indicators due this week.
The Japanese yen crept higher, extending gains from the prior session as more government warnings on currency market intervention helped the yen weather concerns over stretched fiscal spending under Prime Minister Sanae Takaichi, who clocked a landslide victory in recent lower house elections.
Regional currencies were aided by some weakness in the dollar. But overall gains were limited by caution before more U.S. economic prints due this week.
Dollar muted after overnight slide; payrolls, CPI data on tap The dollar index and dollar index futures moved little in Asian trade after tumbling some 0.7% in overnight trade.
The losses saw the greenback fall back in sight of a near four-year low hit in late-January.
“In the absence of new catalysts, we would expect more two-sided USD price actions until further guidance from the next Fed Chair. Ahead of US data this week, FX market has settled with a slightly bearish USD bias again,” BofA analysts said in a note.
U.S. retail sales data for December is due later on Tuesday. The print will be followed by January nonfarm payrolls data on Wednesday, and consumer price index inflation data on Friday.
The prints will be closely watched for more cues on interest rates, with markets already fretting over U.S. monetary policy after President Donald Trump nominated Kevin Warsh as the next Fed chair after Jerome Powell.
Warsh was viewed as a less dovish pick– a notion that sparked a sharp rebound in the dollar and pressure on Asian currencies.
Asia FX firms, yen holds on to post-election gains Broader Asian currencies advanced on Tuesday, with the Japanese yen’s USD/JPY pair falling 0.3%.
The yen marked two straight days of gains after a series of warnings from government officials that they will intervene in currency markets.
The warnings helped the yen strengthen past persistent concerns over Tokyo’s massive debt pile– concerns that remained in play after Takaichi’s landslide election victory.
Takaichi’s ruling coalition now holds a supermajority in the lower house, giving the prime minister enough political headroom to pass sweeping budgetary and fiscal reforms. A bulk of these will entail more government spending and potential tax breaks.
Among other Asian currencies, the Chinese yuan’s USD/CNY pair fell 0.2%, with the yuan at its strongest level in more than 2-½ years to the dollar. The yuan was supported chiefly by a series of strong midpoint fixes from Beijing.
Chinese CPI inflation data is also due on Wednesday.
The Australian dollar’s AUD/USD pair fell 0.1%, losing some ground after hawkish comments from the Reserve Bank supported the currency. BofA analysts said they viewed the Aussie’s recent gain as stretched, and that a reversal was close.
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