During Wednesday’s Asian trading session, most regional currencies exhibited minimal volatility after the release of U.S. inflation figures aligned with economists’ forecasts. This data maintained prevailing market expectations for successive Federal Reserve interest rate cuts starting in 2026.
The U.S. Dollar Index registered a modest increase of 0.1% in Asia trading hours, building on slight gains from the previous overnight session. Futures tied to the U.S. dollar also rose approximately 0.1% by early GMT.
The latest Consumer Price Index numbers confirmed inflationary pressures remain subdued, reinforcing the consensus around at least two forthcoming reductions in U.S. benchmark interest rates.
Japanese Yen Drops to 1.5-Year Low on Election Speculation
The Japanese yen declined notably against the U.S. dollar, with the USD/JPY rate climbing 0.2% to reach 159.45 yen, marking its highest level since June last year. Reports indicate that Japan’s Prime Minister Sanae Takaichi plans to notify her Cabinet about the intention to dissolve parliament, possibly leading to a snap election in the lower house on February 8.
Market attention has centered on Takaichi’s announced fiscal policies, promising significant stimulus measures designed to stimulate economic growth and counter deflationary trends. Such expansionary plans could elevate government debt levels and potentially postpone the Bank of Japan’s path toward monetary tightening, thereby exerting further downward pressure on the yen. This strategy, often termed the “Takaichi trade,” has intensified currency depreciation over recent trading sessions.
China’s Trade Surplus Signals Strength Amid External and Domestic Demand
Newly released Chinese trade data for December revealed a robust surplus, surpassing export expectations while imports grew healthily. These figures suggest continued resilience in external demand coupled with signs of strengthened domestic consumption.
For the entire year of 2025, China’s trade surplus hit an unprecedented $1.25 trillion, as declines in shipments to the United States were broadly offset by increased demand from alternative global markets.
Chinese yuan exchange rates remained stable, with the onshore USD/CNY pairing largely unchanged and the offshore USD/CNH rate edging up slightly by 0.1%.
Other Regional Currency Movements
Elsewhere in the region, the South Korean won rose by 0.2% against the U.S. dollar, while the Singapore dollar's rate against the U.S. dollar remained flat. Conversely, the Indian rupee appreciated marginally, with the USD/INR rate declining by 0.2%. The Australian dollar also advanced modestly, gaining 0.2% versus the U.S. dollar.