On Friday, most Asian currencies experienced modest gains as the US dollar approached its most significant weekly drop since June 2025. This movement occurred despite lingering geopolitical tensions that tempered broader market enthusiasm. The Japanese yen notably trended lower, reacting to the Bank of Japan's (BOJ) announcement to leave interest rates at 0.75%. The BOJ also raised its economic growth and inflation projections slightly for fiscal years 2025 and 2026, citing anticipated additional government stimulus.
Despite this optimistic revision, the yen did not benefit appreciably because underlying concerns about Japan's sizable fiscal challenges continue to weigh heavily on the currency. This sentiment was underscored by a sharp selloff in Japanese government bonds amidst speculation of increased fiscal strain with Prime Minister Sanae Takaichi's early-February snap election announcement. Further pressure on the yen was evident after new consumer price index figures revealed headline inflation in Japan declined to its lowest point since early 2022, even though core inflation remained above the BOJ's 2% target.
Market participants are now awaiting a post-meeting speech by BOJ Governor Kazuo Ueda, scheduled later on Friday, to gain additional insight into the central bank's outlook. The monetary policy statement reaffirmed the BOJ's stance that interest rate hikes will likely accompany improving growth and inflation metrics consistent with their forecasts.
Outside of Japan, other major Asian currencies generally appreciated against the weakening dollar. The dollar index and related futures saw minor upticks in Asian trading hours yet were down over 1% for the week, marking their steepest decline since June 2025.
The Chinese yuan maintained strong footing, with USD/CNY decreasing by 0.1%, holding near levels not seen since mid-2023. Notably, the People’s Bank of China set the daily yuan midpoint below the 7-yuan level for the first time in 2023, signaling robust institutional support for the currency.
The Australian dollar exhibited a small increase against the US dollar, and the Singapore dollar and Taiwan dollar each fell by about 0.1%. Conversely, the South Korean won lagged, with USD/KRW climbing approximately 0.2%, while the Indian rupee remained pressured just above 91 rupees per dollar.
The rupee’s subdued performance followed a historic low against the dollar earlier in the week, influenced by ambiguity surrounding a potential trade agreement between India and the US. This uncertainty has led investors to approach Indian markets cautiously in the near term.