Asian forex muted, but headed for gains

The won’s USD/KRW pair added 0.2%, while the Singapore dollar’s USD/SGD pair advanced 0.2%

Most Asian currencies moved in a tight range on Friday. Most units were set for strong gains in January, with the Australian dollar among the best-performing Asian currencies amid growing conviction that the Reserve Bank will hike interest rates next week.

The yen also gained sharply on speculation over government intervention in currency markets.

The Australian dollar was the best performing Asian currency in January, with the AUD/USD pair up nearly 5% this month. The pair dropped nearly 0.6% on Friday but remained near a near two-year high.

The currency was boosted by increasing conviction that the RBA will hike interest rates when it meets next week, especially as consumer inflation data for the fourth quarter showed a sharp rise.

The central bank is now expected to hike rates by at least 25 basis points at the conclusion of a two-day meeting on Tuesday, as it moves to curb a late-2025 increase in inflation.

Signs of resilience in the Australian economy also give the RBA some headroom to raise rates.

The yuan was among the beneficiaries of this trade, with the USD/CNY pair reaching its strongest level in nearly three years. A series of strong midpoint fixings from the PBOC also aided the yuan.

The yen also benefited from dollar weakness, with the USD/JPY pair trading down 1.8% in January. The yen recovered sharply from 1-½ year lows amid increased speculation over currency market intervention by Tokyo, especially after Prime Minister Sanae Takaichi warned of excessive bets against the yen.

Still, the USDJPY pair gained 0.5% on Friday after data showed consumer inflation in Tokyo plunged to its lowest level in almost four years in January.

Among other Asian currencies, the won’s USD/KRW pair added 0.2% on Friday and was set to drop 0.4% this month. The Singapore dollar’s USD/SGD pair advanced 0.2% and was set to drop 1.5% in January.