Asian currencies largely maintained their positions on Wednesday, following the release of U.S. Consumer Price Index data that matched market forecasts, sustaining investors' expectations for Federal Reserve rate reductions. The US Dollar Index recorded a 0.1% increase during Asian trading hours and similarly gained modestly overnight, with futures rising by the same margin as of 05:22 GMT.
The inflation figures demonstrated that price pressures remain contained, bolstering the outlook for at least two interest rate cuts by the Federal Reserve in 2026.
Attention in currency circles moved to Japan, where the yen depreciated to a one-and-a-half-year low against the U.S. dollar. The USD/JPY exchange rate increased by 0.2% to 159.45 yen, marking its highest level since June 2024. This adjustment came amid media reports indicating that Japanese Prime Minister Sanae Takaichi is planning to notify her Cabinet later Wednesday of her intention to dissolve parliament. February 8th has emerged as a potential date for a snap general election for the lower house.
Investors have centered on Takaichi's commitment to expansionary fiscal measures, including sizable stimulus initiatives intended to stimulate economic growth and combat deflation. Such policies could exert downward pressure on the yen by raising Japan's government debt and potentially delaying monetary tightening measures from the Bank of Japan.
This anticipated fiscal stimulus, referred to in markets as the "Takaichi trade," has contributed to recent depreciation of the yen.
Turning to China, December trade statistics revealed a strong surplus, as exports surpassed forecasted levels and imports expanded healthily, indicating both robust foreign demand and improving domestic consumption. For the entirety of 2025, China's trade surplus reached a record $1.25 trillion. While export disruptions to the United States affected figures, these were largely counterbalanced by heightened demand from other global regions.
The Chinese yuan showed relative stability, with the onshore USD/CNY pair remaining steady and the offshore USD/CNH pair rising marginally by 0.1%. In other Asian currency movements, South Korea's won advanced 0.2% against the dollar, the Singapore dollar remained unchanged, the Indian rupee strengthened by 0.2%, and the Australian dollar appreciated 0.2% versus the U.S. dollar.