Asian currency markets experienced relative calm on Friday, with most currencies trading within narrow parameters. The U.S. dollar maintained a firm position close to its highest level in six weeks, supported by favorable economic indicators from the United States and growing market sentiment that the Federal Reserve will delay cutting interest rates.
The U.S. Dollar Index showed stability during the Asian trading session after reaching its peak since early December the previous night. Futures tied to the index remained largely unchanged as of 03:35 GMT.
U.S. Labor Market Data Deter Fed Rate Cut Speculation
Newly released U.S. economic data revealed that initial jobless claims unexpectedly fell to 198,000 last week, which was significantly below the consensus forecast of 215,000. This indicator underscores ongoing strength in the American labor market.
This robust employment data has contributed to a shift in market expectations, persuading investors that the Federal Reserve may maintain steady policy rates for an extended period. Anticipation of the first rate cut has now been deferred toward the middle of the year.
Further reinforcing this cautious sentiment, numerous Federal Reserve officials conveyed a measured approach to upcoming interest rate decisions. They highlighted signs of labor market stabilization alongside persistent inflation pressures, suggesting a readiness to pause rate policy adjustments in the near term.
Japanese Yen Stabilizes on Government Intervention; Faces Weekly Declines
In Japan, the yen edged higher by approximately 0.3% against the U.S. dollar, following a recent slide to an 18-month low. This slight appreciation came after verbal interventions from Japanese policymakers aimed at curbing the steep depreciation of the currency.
Analysts at MUFG noted concerns within the Bank of Japan regarding the yen's weakness, emphasizing its increasing influence on inflation dynamics. Market speculation about a potential snap election under Prime Minister Sanae Takaichi further pressured the yen, as such political developments could promote looser fiscal policies and increased government expenditures, which are typically unfavorable for the currency.
Other Regional Currencies Exhibit Mixed Movements
Elsewhere in Asia, the South Korean won appreciated modestly, with the USD/KRW rate rising by 0.2%. This movement marks a weekly gain exceeding 1%, despite a slight setback the previous day after U.S. Treasury Secretary Scott Bessent's remarks provided temporary support.
The Chinese yuan’s onshore pair, USD/CNY, remained virtually unchanged, while the offshore pair, USD/CNH, increased marginally by 0.1%. Similarly, both the Indian rupee and Singapore dollar showed stable trading against the U.S. dollar.
The Australian dollar registered a modest 0.1% increase versus the U.S. dollar on Friday.