Dec 27 2024: Asian currencies mostly declined on Friday, with the South Korean won under pressure due to escalating political unrest, while the Japanese yen strengthened on renewed expectations of a rate hike.
The U.S. Dollar Index edged higher in Asian trade, hovering near the two-year peak it touched last week. The U.S. Dollar Index Futures also rose slightly, maintaining dollar strength and pressuring regional currencies.
Japanese Yen Gains on Rate Hike Speculation
The Japanese yen advanced, with the USD/JPY pair falling 0.3% on Friday.
Tokyo’s consumer price index for December exceeded expectations, reflecting growing price pressures. The data bolstered the outlook for a near-term rate hike by the Bank of Japan (BoJ).
Minutes from the BoJ’s December meeting revealed that some policymakers anticipated the alignment of conditions for rate adjustments, with one suggesting action could occur “in the near future.”
While Japan’s factory output contracted in November, the decline was milder than anticipated, offering a mixed economic signal amid subdued foreign demand.
Broad Declines for Asian Currencies
Most Asian currencies were set for weekly losses following sharp declines last week, driven by the Federal Reserve’s indication of fewer rate cuts in 2025.
- The Indian rupee fell further, with the USD/INR pair rising 0.2% to 85.713 rupees.
- The Chinese yuan remained steady, with the USD/CNY pair little changed. November data showed industrial profits declined at a slower rate, providing limited relief amid weak domestic demand.
- The Singapore dollar saw the USD/SGD pair rise 0.1%, while the Australian dollar fell slightly.
- The Philippine peso strengthened, with the USD/PHP pair falling 0.4%, while the Indonesian rupiah weakened, with the USD/IDR pair up 0.4%.
The dollar’s ongoing strength stems from the Federal Reserve’s hawkish stance and expectations of robust U.S. economic performance under the incoming Donald Trump administration.
South Korean Won Tumbles Amid Political Unrest
The South Korean won experienced sharp losses, with the USD/KRW pair climbing 0.7% on Friday after a similar jump in the previous session. The currency was set to decline 2.5% for the week.
The turmoil is tied to South Korea’s acting president, Prime Minister Han Duck-soo, who faces an impeachment vote as the Constitutional Court deliberates on President Yoon Suk Yeol’s controversial martial law declaration.
The escalating crisis has raised concerns over the nation’s political stability, prompting unease among international allies.
