How Asian Currencies Reacted to U.S. Political Uncertainty and Upcoming Inflation Data

Asian Currencies Rise as Dollar Weakens Post-U.S. Presidential Debate; Key Inflation Data Awaited

On Wednesday, most Asian currencies strengthened as the U.S. dollar retreated following a heated U.S. presidential debate. Market attention is now turning to crucial inflation data expected later in the day.

Japanese Yen Leads Gains Amid Safe Haven Demand

The Japanese yen saw the largest gains, with safe haven demand surging after the debate. The yen reached its highest level since January, boosted by hawkish remarks from Bank of Japan (BOJ) officials. BOJ member Junko Nakagawa hinted at potential interest rate hikes if inflation aligns with forecasts, adding to the currency’s strength.

Asian Currencies See Relief From Softer Dollar

Broader Asian currencies also advanced as the dollar weakened. However, markets across the region remained cautious after steep losses last week due to declining risk appetite.

U.S. Dollar Declines After Presidential Debate

The U.S. dollar index fell by 0.2% during Asian trading after the intense debate between Kamala Harris and Donald Trump. The debate fueled uncertainty surrounding the 2024 presidential race, leading to a decline in the greenback. Both candidates engaged in personal attacks, further raising market concerns.

In addition to political factors, the focus is on upcoming U.S. Consumer Price Index (CPI) inflation data, which will provide more insights into potential Federal Reserve interest rate moves. The data release comes just one week before a crucial Fed meeting, where a 25 basis point rate cut is widely anticipated.

Yen Hits 8-Month High on BOJ’s Hawkish Stance

The yen’s strength was underscored by Junko Nakagawa’s comments, which aligned with recent hawkish signals from the BOJ. The USD/JPY pair dropped 0.8% to 141.38, the lowest since early January. Investors remain on edge as they await the next BOJ meeting, with speculation about another rate hike following the July increase.

Other Asian Currencies See Modest Gains

The Chinese yuan (USD/CNY) edged down by 0.1%, impacted by new U.S. trade restrictions on China. The South Korean won (USD/KRW) and Singapore dollar (USD/SGD) both posted small gains, falling 0.3% and 0.2%, respectively.

The Indian rupee (USD/INR) steadied near 84, while the Australian dollar (AUD/USD) remained flat after sliding from nine-month highs last week.