Most Asian currencies were largely unchanged on Monday due to market holidays in several key countries, keeping trading volumes limited. With Chinese, Singapore, South Korean, and Hong Kong markets closed for the Lunar New Year holiday and Japanese markets closed for a memorial day, there were limited moves in regional currencies. Additionally, anticipation of U.S. inflation data also led to caution among traders, resulting in minimal movement in the dollar and other currencies.
The dollar slightly declined in offshore trade, while the yen and yuan also experienced slight declines. The focus was on the upcoming U.S. inflation data, which is expected to indicate ongoing inflationary pressures, prompting the Reserve Bank of India to maintain a hawkish stance. Furthermore, traders were awaiting speeches from various Fed officials, looking for insights on future interest rate policies, which would potentially impact the strength of Asian currencies.
Meanwhile, the Japanese yen remained at a 2-½ month low against the dollar following comments from the Bank of Japan Deputy Governor, signaling that any adjustment to the bank’s ultra-dovish stance will be gradual. The yen’s performance has been weakened by the growing divergence between local and U.S. interest rates, resulting in the yen being the worst-performing Asian currency so far in 2024.