Asia FX Subdued Over US Tariff Concerns; Japanese Yen Jumps on Strong GDP Data
Robert J. Williams
Most Asian currencies weakened on Monday amid concerns over fresh U.S. tariffs under Donald Trump’s administration, while the Japanese yen strengthened with data showing faster-than-expected economic growth in the fourth quarter.
Japanese Economic Growth Surpasses Expectations
Japan’s economy expanded at an annualized rate of 2.8% in the fourth quarter of 2024, significantly surpassing market expectations of a 1.0% increase, according to the gross domestic product (GDP) data released on Monday.
This growth was driven by robust exports and moderate private consumption. On a quarterly basis, the economy grew by 0.7%, exceeding the anticipated 0.3% rise.
The Japanese yen rose against the U.S. dollar, with the USD/JPY pair falling 0.4% as of 03:48 GMT.
“The Japanese economy continues to grow, faster than the BoJ’s forecast. Given the upside risks to higher inflation, the BoJ is likely to raise rates as early as May if the Shunto wage negotiation results are as strong as last year,” ING analysts said in a recent note.
Asia FX Subdued on US Tariff Concerns
Other regional currencies were under pressure in anticipation of fresh U.S. tariffs. Emerging Asian economies, which have seen their export shares to the U.S. rise in recent years, are particularly vulnerable to an escalating trade war.
The interconnectedness of these economies with both the U.S. and China means that increased tariffs could disrupt trade flows, leading to depreciation in regional currencies.
The Chinese yuan’s onshore pair USD/CNY was largely unchanged, while the offshore pair USD/CNH inched 0.1% lower.
The Indonesian rupiah’s USD/IDR pair rose 0.3%, while the Indian rupee’s USD/INR pair was muted.
The Malaysian ringgit’s USD/MYR pair rose 0.2%, while the Philippine peso’s USD/PHP climbed 0.4%.
“Asian FX has held up quite well this year, with only modest losses for Indonesia, India and the Philippines. However, it’s still too early to call the ‘all-clear’ on trade and the bloc can easily come under renewed pressure,” ING analysts wrote.
Elsewhere, the Australian dollar’s AUD/USD pair gained 0.3%, while the Singapore dollar’s USD/SGD pair was largely unchanged.
The South Korean won’s USD/KRW pair edged up 0.1%.
Dollar Steady After Weekly Loss, Investors Assess US Inflation Data
The dollar had come under pressure last week, declining more than 1%, as investors weighed the economic impact of the gradual imposition of tariffs, and assessed crucial inflation data.
The US Dollar Index was largely muted during Asian trading, while the Dollar Index Futures inched marginally higher.
January inflation data came in higher than expected, with the consumer price index (CPI) rising 3% annually, while the producer price index (PPI) also increased.
However, certain components of both CPI and PPI that factor into the Fed’s preferred personal consumption expenditures (PCE) price index showed some moderation.
This slight cooling has fueled hopes that inflation may be trending downward, potentially allowing the Fed to ease policy later in the year.
In the Asia-Pacific region, monetary policy decisions in Australia and New Zealand will be in focus this week.
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