Asian currencies weakened on Thursday as renewed strength in the U.S. dollar and firm messaging from policymakers at the Federal Reserve pressured regional exchange rates. The South Korean won and Indian rupee led the declines, while the Australian dollar moved higher following encouraging domestic employment figures.
The US Dollar Index rose 0.1% after climbing roughly 0.6% in the previous session. Futures tied to the index were also up 0.1% by 23:56 ET (04:56 GMT).
Trading conditions across parts of Asia were relatively quiet, with lighter volumes due to Lunar New Year holidays in several markets, which added to currency volatility.
Minutes from the Fed’s most recent policy meeting indicated differing views among officials, though many signaled that interest rates may need to remain elevated for an extended period. Some policymakers also suggested additional increases could be considered if inflation proves persistent.
These signals reinforced expectations that U.S. monetary policy will stay restrictive, weighing on higher-risk Asian currencies. Investors are now turning their attention to the upcoming U.S. personal consumption expenditures (PCE) price index data—widely regarded as the Fed’s preferred inflation measure—for further clues on the rate outlook.
Among regional currencies, the won weakened, with USD/KRW climbing 0.6%, while USD/INR rose 0.4% against the rupee. The offshore yuan (USD/CNH) gained 0.2%, Singapore’s USD/SGD edged 0.1% higher, and USD/JPY advanced 0.2% against the Japanese yen.
In contrast, the Australian dollar strengthened, with AUD/USD rising 0.2% after data showed the country’s unemployment rate held steady at 4.1% in January. Although employment growth slowed, the figures pointed to a still-tight labor market.
The data supported the hawkish stance of the Reserve Bank of Australia, which raised its cash rate earlier this month, citing ongoing inflation pressures and solid labor conditions. Markets continue to anticipate further rate increases from the central bank this year, providing relative support to the Australian dollar.
Frequently Asked Questions
Why did most Asian currencies decline?
Asian currencies came under pressure due to a stronger U.S. dollar and hawkish signals from the Federal Reserve. Policymakers indicated interest rates may remain elevated for longer, which boosted the dollar and weighed on regional currencies.
How did the U.S. dollar perform?
The US Dollar Index rose after posting solid gains in the previous session, reflecting increased investor confidence in the dollar amid expectations of prolonged restrictive U.S. monetary policy.
Which Asian currencies were most affected?
The South Korean won and Indian rupee led the losses. The won saw USD/KRW rise notably, while USD/INR also climbed. Other regional currencies, including the offshore yuan, Singapore dollar, and Japanese yen, recorded more modest declines.
Why is the U.S. PCE data important for markets?
The personal consumption expenditures (PCE) price index is the Federal Reserve’s preferred inflation gauge. Investors closely monitor it for clues about future interest rate decisions, which significantly influence currency markets.
Why did the Australian dollar rise despite regional weakness?
The Australian dollar strengthened after labor data showed unemployment remained steady, signaling a resilient job market. This supported expectations that the Reserve Bank of Australia may continue tightening monetary policy, offering relative support to the currency.
