Asian Currencies Slide as Dollar Holds Near 2-Year High Ahead of Payrolls Data
Most Asian currencies weakened on Friday as the dollar remained near its strongest level in over two years, with traders anticipating a potentially robust nonfarm payrolls report due later in the day.
Weak Chinese Data and BOJ Speculation Impact Sentiment
Regional markets were also weighed down by disappointing inflation data from China, while speculation over a possible interest rate hike by the Bank of Japan (BOJ) offered only temporary support to the yen.
The dollar saw little movement during U.S. holiday trading hours on Thursday but maintained its strength following hawkish signals from the Federal Reserve earlier in the week.
Dollar Index Steady Amid Fed Hawkishness
The dollar index and its futures inched higher during Asian trade, holding just below their highest levels since November 2022. The spotlight remained on the December nonfarm payrolls data, set to provide further insight into the U.S. economy and Federal Reserve policy.
The greenback’s strength was underpinned by the minutes from the Fed’s December meeting, which reinforced expectations for a slower pace of rate cuts this year. Policymakers also expressed concerns over inflationary risks tied to expansionary and protectionist policies under President-elect Donald Trump.
Yen Eases Despite Strong Japanese Data
The Japanese yen lost ground on Friday, with the USD/JPY pair rising 0.2% to stay above the 158 yen level.
While stronger-than-expected household spending and wage growth data bolstered expectations of a BOJ rate hike as early as late January, these factors provided only limited support for the yen. The currency remained pressured by the outlook for higher-for-longer U.S. interest rates.
Broader Asian Weakness Driven by Dollar Strength
Other Asian currencies faced similar headwinds, with traders turning cautious ahead of the nonfarm payrolls report.
- The Chinese yuan (USD/CNY) weakened 0.3%, pressured by soft December inflation data and concerns over potential trade tariffs under Trump’s administration.
- The Australian dollar (AUD/USD) fell 0.2%, nearing a two-year low, as mixed inflation data fueled expectations of earlier rate cuts by the Reserve Bank of Australia.
- The South Korean won (USD/KRW) dropped 0.4%, weighed down by ongoing political turmoil.
- The Singapore dollar (USD/SGD) edged 0.1% higher.
