Most Asian currencies slipped on Tuesday and remained on track for annual losses as the dollar stayed strong heading into 2025. Meanwhile, the Chinese yuan weakened after data revealed slower-than-expected growth in the country’s factory activity.
The U.S. Dollar Index eased 0.1% during Asian trading hours but held close to the two-year high it reached earlier this month. Similarly, U.S. Dollar Index Futures edged lower.
Asian currencies have faced significant pressure this year due to the Federal Reserve’s hawkish interest rate stance and concerns about a potential U.S.-China trade war under Donald Trump’s administration, which dampened risk sentiment.
The Fed’s recent indication of fewer rate cuts in 2025 has bolstered the dollar, adding to the downward pressure on Asian currencies.
Chinese Yuan Weakens Amid Slower Factory Growth
The onshore yuan pair USD/CNY rose 0.2% on Tuesday, while the offshore pair USD/CNH remained largely flat.
China’s manufacturing sector expanded for the third consecutive month in December, supported by recent stimulus measures, according to purchasing managers index data released on Tuesday. However, the growth fell short of market expectations and was slower than the previous month’s pace.
Investors are awaiting further details on Beijing’s fiscal stimulus plans for the coming year, with reports suggesting increased government spending to boost economic growth.
Asian Currencies on Track for Annual Losses
The Japanese yen’s USD/JPY pair dropped 0.3% on Tuesday after hitting a five-month high in the previous session. For the year, the yen is expected to decline by over 10% against the U.S. dollar.
The Singapore dollar’s USD/SGD pair remained largely steady on Tuesday but was on track for a yearly gain.
The Australian dollar’s AUD/USD pair edged slightly lower during the session.
The Indian rupee’s USD/INR pair rose 0.1%, poised to record a more than 3% gain for the year despite hitting fresh record lows against the U.S. dollar this month.
The Thai baht’s USD/THB pair climbed 0.3%, while the Indonesian rupiah’s USD/IDR pair gained 0.2% on Tuesday.
South Korean Won Declines Amid Escalating Political Turmoil
The South Korean won’s USD/KRW pair edged up 0.1% on Tuesday, continuing a challenging December that saw the currency weaken nearly 6% against the U.S. dollar following a failed attempt to impose martial law.
The won stands out as the worst-performing Asian currency in 2024, with a yearly decline of over 12%.
In recent developments, a South Korean court approved an arrest warrant on Tuesday for President Yoon Suk Yeol, who was impeached and suspended from office after declaring martial law on December 3.
The Corruption Investigation Office for High-ranking Officials (CIO) confirmed that the Seoul Western District Court had issued the warrant as part of an investigation into Yoon’s brief but controversial martial law declaration.
