The Indonesian rupiah hovered around IDR 16,900 per dollar on Friday, remaining under pressure and moving closer to its record low of 16,960 amid expectations of further monetary easing ahead of the central bank’s first policy meeting of the year on January 20–21, where forex stability is likely to be a key focus. A Bank Indonesia official noted that the currency’s weakness largely mirrored regional moves, adding that the central bank will stay active in the market to ensure the exchange rate reflects fundamentals and orderly market conditions. Between September 2024 and September 2025, policymakers cut rates by a cumulative 150bps, supported by subdued inflation. They have recently stressed the need to support growth, particularly following a major disaster in Sumatra that has increased fiscal pressures. For the week, the rupiah is set for a second consecutive decline. Globally, the dollar index held around 99.3, as resilient U.S. economic data tempered bets of further Fed rate cuts.

Rupiah Facing Headwinds Near Record Low

The New Zealand dollar rose to around $0.575 on Friday and is on track for a weekly advance, supported by upbeat manufacturing data. The BusinessNZ PMI showed that the country’s manufacturing activity in December grew for the sixth consecutive month and at the fastest pace since December 2021. The report followed data showing that filled jobs hit an eight-month high in November, while fourth-quarter business confidence surged to its highest level since 2014. These indicators boosted expectations for a rate hike later this year, with traders implying a 57% probability of an increase in September, with a move fully priced in by October. However, markets see almost no chance of a change in the 2.25% cash rate at the Reserve Bank of New Zealand’s February meeting. For the week, the kiwi has risen 0.5%, poised to end a two-week losing streak.

New Zealand Dollar Heads for Weekly Gain

The Indian rupee fell to around 90.4 per dollar, extending losses for another session and the lowest in four weeks amid weaker capital inflows and less dovish signals from Federal Reserve officials. Traders cited a strong US labor market and Fed guidance that any rate cuts would depend on sustained progress toward the 2% inflation target, which has kept Treasury yields elevated and the dollar firm, leaving the rupee under pressure. Adding to market caution, India’s economic data disappointed expectations; unemployment rose slightly to 4.8% in December 2025 from 4.7% in November, while the merchandise trade deficit widened sharply to $25 billion, up from $20.6 billion a year earlier. The releases prompted investors to adjust their expectations toward further monetary easing by the Reserve Bank of India.

Rupee Falls to 4-Week Low

The offshore yuan traded around 6.96 per dollar on Friday, hovering near its strongest level since May 2023, fueled by renewed corporate demand for the currency. Chinese banks facilitated record foreign currency sales into yuan in December, driven by expectations of further gains and seasonal demand. Additional support came from the PBoC, whose daily reference rate has strengthened steadily, signaling tolerance for managed appreciation. As the yuan continued to rally, global banks are revising forecasts upward, with Morgan Stanley now seeing it reach 6.85 per dollar in Q1, while Australia & New Zealand Banking Group expects 6.85 by year-end, and Macquarie Group 6.8. Meanwhile, Deputy Governor Zou Lan said there is “some space” to cut reserve requirements and policy rates. Starting Monday, the PBOC will trim rates on structural monetary tools by 25 bps, lowering the one-year relending rate to 1.25% from 1.5%. Over the week, the yuan is poised for its largest weekly gain since May 2023.

Offshore Yuan Trades Near 32-Month High

The Japanese yen rose toward 158 per dollar on Friday, building on gains from earlier in the week as investors looked ahead to the Bank of Japan’s upcoming policy meeting for any signals on its rate-hike trajectory. The central bank is widely expected to maintain current policy next week, with markets pricing in the next rate increase around June. BOJ Governor Kazuo Ueda reiterated that the bank stands ready to raise rates if economic and price developments align with projections. The yen also received support this week from concerns over potential official intervention as it approached the key 160 level, with Japanese authorities cautioning against rapid, one-sided currency movements. Meanwhile, speculation that Prime Minister Sanae Takaichi may call a snap election next month to advance more aggressive fiscal spending continued to weigh on the yen. Takaichi is reportedly scheduled to provide further details on the dissolution of the lower house to ruling bloc officials on Jan. 19.

Japanese Yen Firms as BOJ Meeting Looms

The Australian dollar steadied around $0.669 per dollar on Friday and was on track for modest weekly gains, as renewed expectations for a potential rate hike from the Reserve Bank lent support to the currency. On Thursday, Commonwealth Bank of Australia raised owner-occupier mortgage rates by up to 0.7 percentage points, pushing its lowest two-year fixed rate to 5.79%. Macquarie Bank followed with a 0.25 percentage point increase across all fixed loan terms. These moves come after similar rate increases by Australia’s other major banks in December, underscoring growing expectations that the cash rate may remain higher for longer. Markets are now pricing in a 27% chance of a quarter-point rate hike at the RBA’s February meeting, with expectations rising sharply to around 76% by May. Meanwhile, additional support for the Australian dollar came from a rise in global stocks, particularly Australian shares, which rallied for a fifth consecutive session and hovered near a two-month high.

Australian Dollar Set for Modest Weekly Gain

The dollar index held steady around 99.3 on Friday, poised for a third consecutive weekly gain as strong US economic data tempered expectations for additional Federal Reserve interest rate cuts. Weekly jobless claims came in well below forecasts, signaling a resilient labor market, while some manufacturing surveys also exceeded expectations. Several Fed officials also highlighted signs of labor market stability and cautioned against potential inflationary risks. Markets widely anticipate that the Fed will keep rates unchanged later this month, with forecasts for the next rate cut now pushed back to June or later. On the trade front, the US agreed to lower tariffs on Taiwanese goods from 20% to 15%, while Taiwanese companies committed to investing at least $250 billion to expand chip manufacturing capacity in the US. Elsewhere, President Trump indicated he may delay action in Iran but reiterated his intention to pursue the acquisition of Greenland.

Dollar Heads for 3rd Weekly Gain

The Brazilian real strengthened toward 5.36 per US dollar, reaching six week highs, amid a firmer domestic economic backdrop and decisive regulatory action, which reduced Brazil’s risk premium. Domestic data surprised to the upside after IBGE reported retail sales rising 1.0% month on month in November and 1.3% year on year, reinforcing confidence in near term activity and lowering the risk premium demanded on Brazilian assets. At the same time, the Central Bank’s January 15 decision to place Reag into extrajudicial liquidation removed a fraud linked tail risk associated with Banco Master, signalling regulatory resolve and limiting concerns about broader financial contagion. The macro backdrop has also turned more supportive as annual inflation ended 2025 back within the target range, allowing expectations to shift toward earlier but moderate Selic easing while the policy rate remains at 15%, preserving Brazil’s yield advantage and supporting carry inflows.

Brazilian Real Rebounds to 6-Week Highs

The Mexican peso strengthened toward 17.65 per US dollar, its strongest level since July 2024, driven by renewed carry-trade inflows anchored by Mexico’s still-elevated real interest rates. Even as the USD remained firm on resilient US activity data and diminished urgency for near-term Fed easing, demand for pesos increased as investors favored high-yield currencies supported by a an increasingly hawkish monetary stance. Banxico has slowed its rate-cut cycle, holding the policy rate at 7% while signaling caution amid sticky core inflation, preserving one of the widest real yield differentials in emerging markets and sustaining inflows into peso-denominated fixed income, reinforced by strong participation in a roughly $9bn sovereign bond issuance in early January. Expectations that Banxico will keep policy restrictive for longer have tightened local rate curves and reduced hedging demand, allowing carry flows to offset USD strength and underpin the peso’s advance.

Mexican Peso at Strongest Level Since July 2024

The Canadian dollar softened toward 1.39 per US dollar, trading in a narrow range near early December lows as renewed US dollar support and weaker oil prices offset still supportive domestic fundamentals. The greenback firmed after US initial jobless claims fell sharply, reinforcing confidence in a resilient US labor market and reducing the urgency for near term Fed easing, while President Trump’s calmer tone on Iran pared the geopolitical premium in crude, pushing oil prices lower and eroding the CAD’s terms of trade support. At home, upside remains capped by softer labor dynamics, with unemployment holding near 6.8%, reinforcing the Bank of Canada’s neutral stance and limiting the scope for tighter financial conditions to underpin the currency. Even so, downside pressure remains contained, as broader fundamentals have improved modestly, with earlier gains in oil and gold and a stabilization in rate spreads continuing to provide a floor.

Canadian Dollar Hovers Near Ealry-December Lows

The dollar strengthened above 99.4, its highest level in about seven weeks, as new data reinforced the view that the US economy remains resilient, reducing pressure on the Federal Reserve to cut interest rates quickly. Weekly jobless claims came in well below expectations, confirming that layoffs remain limited and that the labor market is holding up despite an extended period of high borrowing costs. This eased concerns that the Fed needs to accelerate rate cuts to support employment, weakening the case made by more dovish policymakers. Meanwhile, President Donald Trump said he has no plans to fire Fed Chair Jerome Powell despite threats of an indictment from the Department of Justice. The central bank is widely expected to hold rates steady later this month, with markets pricing in two cuts starting in June. Elsewhere, Trump signaled he may delay action in Iran while signing trade measures on critical minerals and AI chips.

DXY Climbs to 7-Week High

The South African rand traded around 16.4 per USD, near its highest level since August 2022, as it continued to benefit from elevated precious metal prices and strengthening domestic fundamentals. In 2025, the rand posted a remarkable 14% annual gain, its best performance since 2009, supported by a weaker dollar, surging gold prices, and ongoing economic reforms. An improving fiscal situation, policy coherence, and the South African Reserve Bank’s 3% inflation target have helped anchor expectations, boosting investor confidence in price stability. Meanwhile, traders kept a close eye on geopolitics, the Fed’s independence, and the potential renewal of the US trade preference program under AGOA.

South African Rand at Over 3-Year High

The euro continued its decline against the US dollar, trading at $1.163, its weakest level in over a month, as investors weighed economic data from the Eurozone and the US alongside diverging central bank policies. Germany’s economy grew 0.2% in 2025, ending a two-year contraction, supported by household and government consumption, though weakness in manufacturing keeps the outlook fragile. Eurozone inflation slowed to 2.0% in December, returning to the ECB’s target and reinforcing expectations that rates will remain on hold. ECB member François Villeroy de Galhau this week called expectations of a rate hike in 2026 “fanciful.” In the US, inflation rose less than expected, supporting market expectations of potential Fed rate cuts later this year.

Euro Weakens to One-Month Low

The pound pared losses against the dollar, holding near $1.34 after UK economic growth exceeded expectations. GDP rose 0.3% in November, rebounding from a 0.1% contraction in October and surpassing forecasts of a 0.1% increase. Over the three months to November, GDP expanded 0.1%, defying consensus expectations of a 0.2% contraction. Market expectations for monetary easing have shifted slightly: traders are now pricing in around 46 basis points of cuts by year-end, with an 84% probability of a second 25-basis-point reduction in December. A first rate cut remains fully priced in by June, with an 88% chance it will occur in April. Prior to the GDP release, expectations had priced in just under 48 basis points of easing for the remainder of the year, with 23 basis points by April.

Pound Steadies After Stronger-Than-Expected GDP Data

The Indonesian rupiah weakened toward IDR 16,880 per dollar on Thursday, extending losses from the prior session and hovering near multi-month lows. Sentiment remained fragile amid expectations of further monetary easing as Bank Indonesia prepares for its first policy meeting of the year. Traders largely dismissed Finance Minister Purbaya Yudhi Sadewa’s assurances that the currency would strengthen amid a gradual economic recovery, instead focusing on cost pressures that emerged in December following the late-November disaster in Sumatra. Between September 2024 and September 2025, the central bank cut rates by a cumulative 150 bps, supported by contained inflation. Q4 GDP data, due in early February, will follow Q3’s 5.04% yoy growth, down from 5.12% in Q2 on softer consumption, a pace Governor Perry Warjiyo noted remains below potential. On the global front, the dollar index stabilized above 99 as traders weighed fresh U.S. economic data and lingering concerns over Fed independence.

Rupiah Holds Near Multi-Month Lows Despite Government Optimism

The South Korean won weakened to around 1,471 per dollar, reversing gains from the previous session, as the Bank of Korea held its benchmark interest rate unchanged. The decision underscored that concerns over a weak won and exchange-rate volatility are limiting room for further policy easing, even as growth remains uneven. The stance helped curb sharper depreciation but failed to deliver a sustained rebound as broader FX pressures persisted amid continued global dollar strength and regional currency movements. Additionally, the won saw temporary support from rare verbal backing by US Treasury Secretary Scott Bessent, who said the won’s recent decline was excessive and not in line with Korea’s fundamentals. Meanwhile, authorities stepped up FX stabilization measures, including tighter monitoring of cross-border flows and a crackdown on illegal foreign-exchange transactions, signaling official resolve to curb excessive volatility and reinforce market confidence.

South Korean Won Retreats as BOK Holds Rates

The Indian rupee fell to around 90.2 per dollar, pulling back gains from the previous session as investor attention shifted to the Maharashtra civic elections. After a four-year delay, 1,700 candidates are contesting 227 seats in the Brihanmumbai Municipal Corporation, which has an annual budget of over INR 74,400 crore. The elections, held after a nine-year gap, are under tight security, with vote counting scheduled for January 16. The political significance of the Mumbai elections has weighed on sentiment, as investors monitor potential implications for state and local governance. Tempering the rupee’s decline, India’s wholesale price index rose 0.83% year-on-year in December 2025, rebounding from a 0.32% drop in November, prompting investors to scale back expectations of aggressive monetary easing by the central bank.

Rupee Slips on Election Caution

The dollar stabilized above 99 on Thursday after seeing sharp swings earlier in the week, as investors continued to weigh the outlook for Federal Reserve policy amid fresh economic data and concerns over Fed independence. Data on Wednesday showed US producer inflation accelerated slightly in November, following earlier reports pointing to subdued consumer price growth. Retail sales also rose more than expected in November. Meanwhile, President Donald Trump said he has no plans to fire Fed Chair Jerome Powell despite threats of an indictment from the Department of Justice. The central bank is widely expected to hold rates steady later this month, with markets pricing in two cuts starting in June. Elsewhere, Trump signaled he may delay action in Iran while signing trade measures on critical minerals and AI chips.

Dollar Steadies as Traders Weigh Fed Outlook

The Australian dollar was largely unchanged around $0.668 on Thursday, trading near two-week lows, as geopolitical tensions weighed on global risk sentiment, while investors continued to assess a hawkish domestic policy outlook. Often seen as a proxy for global risk appetite, the currency struggled amid a flurry of geopolitical headlines with US President Donald Trump easing warnings of striking Iran over its crackdown on civil unrest, while Washington withdrew some personnel from Middle East bases as Iran warned it would target American sites if attacked. Meanwhile, Australia’s consumer inflation expectations remained elevated at 4.6% in January, little changed from December, reflecting ongoing household concern over price pressures. Markets currently price in a 27% chance of a February quarter point rate hike by the Reserve Bank, rising to 76% by May. Attention now turns to Q4 CPI due later this month, with next week’s December jobs report also expected to provide further clues.

Aussie Dollar Struggles Near Two-Week Lows

The Japanese yen strengthened toward 158 per dollar on Thursday, rebounding from its lowest levels since July 2024 when authorities intervened in the foreign exchange market as the currency breached the key 160 level. Earlier this week, Finance Minister Satsuki Katayama said she and US Treasury Secretary Scott Bessent had raised concerns over the yen’s “one-sided depreciation” during a bilateral meeting on the sidelines of a multilateral finance ministers’ gathering. Bessent later on underscored the importance of clear monetary policy formulation and communication, echoing his remarks from last October urging Japan’s government to give the Bank of Japan “policy space” to combat inflation. Meanwhile, markets continued to speculate on a potential snap election next month that could trigger more aggressive fiscal stimulus, keeping the yen under pressure.

Japanese Yen Rises on Intervention Fears

The South Korean won rallied nearly 1% toward 1,460 per dollar, recouping part of this year’s losses after US Treasury Secretary Scott Bessent criticized the currency’s excessive depreciation in a rare verbal intervention. The won had been down more than 2% year-to-date before his comments, sliding toward its weakest level since 2009. Bessent said the currency should reflect Korea’s strong economic fundamentals, making the remarks after talks with Finance Minister Koo Yun Cheol. Meanwhile, local authorities are preparing to issue FX stabilization bonds as early as late January, with the issuance ceiling tripled to $5 billion this year, signaling readiness to bolster reserves and defend the currency. Investors are also looking ahead to the Bank of Korea’s next policy decision, where rates are widely expected to remain unchanged as exchange-rate volatility and elevated housing prices limit room for near-term easing.

South Korean Won Jumps on Bessent Remarks

The Brazilian real weakened toward 5.4 per US dollar after briefly firming earlier in the week, as US dollar resilience and rising political risk outweighed Brazil’s still compelling carry appeal. A new Genial Quaest poll showed President Lula leading comfortably across first and second round scenarios, reviving concerns over fiscal discipline, policy continuity, and a greater role for state intervention as the election cycle comes into sharper focus. At the same time, the dollar stayed well supported by solid US data, with retail sales rebounding strongly in November and core PPI holding flat, reinforcing expectations that the Federal Reserve will keep rates unchanged this month and push back the start of easing. Mixed but cautious Fed rhetoric has helped anchor US yields, limiting room for BRL appreciation despite Brazil’s restrictive monetary stance and elevated interest rate differential.

Brazilian Real Weakens Amid Election Corncerns

The US dollar index held near the 99 mark on Wednesday, inching down from the one month high touched earlier in the session as markets continued to gauge the magnitude of rate cuts that the Federal Reserve may deliver this year. Both headline and core producer prices refrained from rising above expectations in November, consistent with a moderate CPI report from this week. The results maintained the market's view that the Fed has room to deliver multiple interest rate cuts this year to prioritize a stagnating labor market. Still, a portion of the FOMC has persistently flagged concerns of stubborn inflation. In the meantime, the dollar received support from a weaker yen after Prime Minister Takaichi said she would call a snap election, expected to secure a stronger mandate and extend the loose fiscal policy she has called for.

DXY Eases from 1-Month High

The Indonesian rupiah hovered around IDR 16,870 per dollar on Wednesday after briefly firming to 16,835 in the prior session, staying near multi-month lows. Pressure persisted as the U.S. dollar index approached its highest since early December, with inflation data reinforcing expectations that the Fed will keep rates unchanged at its upcoming meeting. Domestically, Bank Indonesia is set to hold its first policy meeting of the year later this month, with prospects of further easing clearly open. Officials continue to signal readiness to support growth, particularly as disaster recovery in Sumatra strains fiscal resources. Between September 2024 and September 2025, the central bank cut rates by a cumulative 150bps, enabled by contained inflation. Meantime, recent data showed seasonal consumption lifted retail activity in November, though sentiment remained fragile. External headwinds also persisted, as slowing exports underscored softer demand from key partners, notably China and Japan.

Dollar Strength Weighs on Rupiah, BI Keeps Easing in View

The Indian rupee strengthened to around 90.1 per dollar, recovering after losses from the previous session amid ongoing trade talks and the latest GDP forecast. Market sentiment remained measured ahead of discussions between India and the United States. External Affairs Minister Jaishankar spoke on Tuesday with US Secretary of State Rubio on trade, critical minerals, nuclear energy, defence, and energy. Negotiations on a bilateral trade deal continue, though progress remains slow due to US demands on India’s farm and dairy sectors. Concerns were eased as government sources stated that the recently announced 25% tariff would have minimal impact on India, given that trade with Iran accounts for only about 0.15% of the country’s total trade. Separately, the World Bank retained India’s GDP growth forecast at 6.5% for 2026-27, signaling a slowdown from its estimate of 7.2% for the current fiscal year, assuming the US maintains 50% tariffs on certain imports.

Rupee Rises on Trade Talks, GDP Outlook

The offshore yuan steadied around 6.97 per dollar on Wednesday, as strong external demand continued to underpin China’s economic growth. Exports jumped 6.6% year on year in December, the fastest pace since September, while imports rose 5.7%, also its strongest growth since September. For 2025 as a whole, China’s trade surplus widened to a record $1.2 trillion, with exports remaining the primary driver of growth and helping to offset weak domestic conditions. Looking ahead to 2026, global demand and China’s export competitiveness are expected to continue supporting the economy, provided the trade truce with the US holds. However, downside risks remain after US President Trump announced new tariffs on countries trading with Iran. Meanwhile, investor sentiment toward Chinese assets has turned increasingly bullish, with confidence in the yuan strengthening after it moved decisively past the 7-per-dollar level and some forecasts projecting appreciation toward 6.25.

Offshore Yuan Steady After Trade Data

The New Zealand dollar hovered around $0.574, near its weakest level since early December, as expectations for near-term interest rate hikes remained low. Recent economic data suggest that activity is gradually recovering, but not strongly enough to justify higher interest rates. Market pricing indicates almost no chance of a rate hike at the Reserve Bank of New Zealand’s February meeting, with only a small probability of a move until at least September. While the central bank has signaled that its easing cycle likely ended last year after a cumulative 225 bps of rate cuts, it has also pushed back against expectations for imminent tightening. Attention now turns to fourth-quarter CPI data due next week, which will provide more clues on the RBNZ’s policy direction. Externally, the kiwi dollar was also pressured by a rebound in the US dollar after inflation data came in broadly in line with forecasts, reinforcing the case for the Federal Reserve to keep rates steady later this month.

New Zealand Dollar Hovers Near 1-Month Lows

The Australian dollar traded around $0.668, hovering near a two-week low, as investors continued to assess the prospect of a February interest rate hike. The probability of the Reserve Bank raising its cash rate by a quarter point next month remained around 27%, down from nearly 40% last week, though markets see a 76% chance of a hike by May. A slight pullback in November inflation and falling consumer confidence this month has kept the February rate move uncertain, pointing to a possible hold for the RBA. Job vacancies dipping 0.2% in the November quarter, also signaled stable labor demand. However, strong November household spending could keep inflation elevated and support expectations of a tighter policy. The central bank's next move will now largely depend on the upcoming Q4 CPI release, with a stronger-than-expected core reading likely to raise pressure for an early rate hike. Markets are also watching next week’s December jobs report for additional guidance on monetary policy.

Australian Dollar Hovers Near 2-Week Low

The Japanese yen weakened past 159 per dollar on Wednesday, hitting its lowest level since July 2024 and approaching the key psychological threshold of 160, which has previously triggered intervention by local authorities. The decline follows speculation that Prime Minister Sanae Takaichi may call a snap election next month to consolidate power and advance expansionary fiscal policies, with reports suggesting lower house elections could be held on February 8. On the economic front, a private survey indicated that manufacturing activity is slowing due to trade frictions, while the service sector faces tourism-related disruptions, limiting the Bank of Japan’s ability to pursue rate hikes. Meanwhile, Finance Minister Satsuki Katayama noted earlier this week that she and US Treasury Secretary Scott Bessent expressed concern over the yen’s “one-sided depreciation” following a bilateral meeting on the sidelines of a multilateral finance ministers’ gathering.

Japanese Yen Nears Key 160 Level

The dollar index rose to around 99.2 on Wednesday, approaching its highest level since early December, as the latest inflation data had little impact on the near-term outlook for Federal Reserve policy. Data released on Tuesday showed US CPI largely met expectations, reinforcing views that the Fed is likely to keep policy unchanged later this month. However, underlying price pressures showed signs of easing, with monthly core inflation at 0.2%, below the anticipated 0.3%. The dollar also shrugged off concerns over the Fed’s independence after the Department of Justice threatened Fed Chair Jerome Powell with a criminal indictment. Comments from other major central bank heads and Wall Street bank CEOs expressing support for Powell helped calm markets. Investors now turn to Wednesday’s US PPI and retail sales reports for further clues on the economic trajectory.

Dollar Climbs to Near 1½-Month High

The euro remained steady just above $1.165, hovering near a one-month low touched last week, as investors assessed the latest US inflation data and its implications for monetary policy. US headline CPI held at 2.7% in December, while the core rate came in slightly below expectations at 2.6%, supporting the prospect of further Fed rate cuts this year. At the same time, concerns over the Fed’s independence eased following pushback from several Republican lawmakers against a Justice Department criminal investigation involving Chair Powell. In Europe, ECB member François Villeroy de Galhau said on Tuesday that expectations of an ECB rate hike this year are “fanciful.” The ECB left policy rates unchanged in December and raised some growth and inflation forecasts, reinforcing market expectations that rates will remain on hold for an extended period. Eurostat data released last week showed headline inflation slowing to 2.0% in December, back at the ECB’s target.

Euro Holds Near One-Month Low

The US dollar index slipped back below 99 on Tuesday as investors increased bets that the Federal Reserve will cut interest rates further following encouraging inflation data. The latest figures showed underlying price pressures are easing, reinforcing the view that inflation is gradually cooling. Core consumer prices, which exclude food and energy, rose 0.2% in December, less than market expectations, while the annual core inflation rate held at 2.6%, matching a four-year low. The data offered a clearer signal of slowing inflation after earlier reports were distorted by shutdown effects.

DXY Eases after Inflation Data

The Mexican Peso touched 17.86 against the USD, the highest since July 2024. Over the past 4 weeks, US Dollar Mexican Peso lost 0.6%, and in the last 12 months, it decreased 12.85%.

Mexican Peso Hits 17-month High

The euro stabilized just above the $1.165 level, hovering near a one-month low reached last week, as worries over the Federal Reserve’s independence eased. The reassurance followed pushback from several Republican lawmakers against a Justice Department criminal investigation involving Fed Chair Jerome Powell. Investors are now turning their attention to key upcoming data for fresh direction on monetary policy, including US consumer price inflation later today. In Europe, ECB Governing Council member François Villeroy de Galhau said on Tuesday that speculation about an ECB rate hike this year is a “fanciful” misconception. The ECB kept policy rates unchanged in December and upgraded some of its growth and inflation forecasts, reinforcing market expectations that rates will remain on hold for an extended period. Supporting this view, Eurostat data released last week showed headline inflation easing to 2.0% in December, back at the ECB’s target, while core inflation slowed to 2.3%.

Euro Steadies Near One-Month Low as Fed Concerns Ease

The Indonesian rupiah hovered near IDR 16,870 per dollar on Tuesday, after briefly weakening past 16,900 in the prior session, remaining close to its lowest level since late April 2025. Sentiment stayed fragile amid expectations of further monetary easing, with the central bank set to hold its first policy meeting of the year later this month. Bank Indonesia officials have signaled readiness to support economic growth, as disaster recovery in Sumatra continues to strain fiscal resources, keeping the door open for more rate cuts even after a cumulative 150bps reduction in 2024–2025. Meanwhile, domestic data reinforced caution: consumer confidence in December slipped from a nine-month high, while full-year vehicle sales fell 6.8% yoy to 808,450 units despite a strong December. Externally, slowing exports pointed to softer demand from top trading partners such as China and Japan. Meanwhile, the dollar index steadied near 99 ahead of U.S. inflation data later this week.

Rupiah Lingers Near 9-Month Low

The Indian rupee slipped to around 90.2 per dollar, extending losses for a second session as global trade tensions intensified following US President Donald Trump’s announcement of a 25% tariff on countries conducting business with Iran. Market sentiment was weighed down as India, which already faces 50% tariffs on exports to the US, could incur additional costs, with half of the existing duties being reciprocal and the remaining 25% imposed as a penal levy on crude oil imports from Russia. Separately, RBI’s currency measures provided some moderation to the pressure, with the central bank set to conduct a $10 billion foreign-exchange swap on Tuesday. Under the operation, the RBI will purchase dollars and inject rupees in the first leg, to be settled on Friday, before reversing the transaction three years later. Market focus is on the cut-off rate, with analysts noting that such auctions allow the RBI to manage forward short positions efficiently while absorbing excess dollar liquidity.

Rupee Weakens on Global Trade Tensions

The Japanese yen depreciated past 158 per dollar on Tuesday, marking its weakest level in a year amid rising political uncertainty over speculation that Prime Minister Sanae Takaichi could dissolve parliament as soon as next month. Takaichi is widely expected to leverage her strong public approval to advance expansionary fiscal policies. Meanwhile, Finance Minister Satsuki Katayama said she and US Treasury Secretary Scott Bessent expressed concerns over the yen’s “one-sided depreciation” following a bilateral meeting on the sidelines of this week’s multilateral finance ministers’ gathering. Katayama also flagged issues with Beijing’s export restrictions on items critical to Japan’s military, including critical minerals. On the monetary front, markets remain split over the timing of the Bank of Japan’s next rate hike, as the latest economic data continue to present a mixed picture.

Japanese Yen Weakens to 1-Year Low

The dollar index steadied near 99 on Tuesday after coming under pressure in the previous session, as investors awaited the latest consumer inflation report for clues on the Federal Reserve’s policy path. Markets are pricing in two Fed rate cuts this year starting in June, although any upside surprise in inflation could limit the central bank’s room to ease. Last week’s nonfarm payrolls report showed job growth came in below forecasts for December, reinforcing a more dovish outlook for Fed policy. Investors are also awaiting a US Supreme Court ruling on the legality of President Donald Trump’s tariff policies, with a decision expected on Wednesday. Meanwhile, the dollar weakened on Monday after federal prosecutors threatened to indict Fed Chair Jerome Powell over his testimony to Congress on a building renovation project, heightening concerns about the central bank’s independence.

Dollar Stabilizes Ahead of Key Inflation Data

The Mexican peso strengthened toward 17.91 per US dollar, testing its strongest level since July 2024, as broad US dollar weakness compounded with a cautious domestic policy backdrop. The recent pullback in the greenback reflects renewed concerns about Federal Reserve independence following reports of a Justice Department inquiry into Chair Jerome Powell, alongside rising expectations for additional Fed rate cuts after December nonfarm payrolls came in below forecasts. At home, after the widely expected 25 bp cut to 7.00% in December, Banxico’s minutes underscored a data dependent stance, acknowledging that while disinflation is advancing, underlying pressures, particularly in core components, still call for prudence. Policymakers signalled no urgency to accelerate easing, framing future moves as conditional rather than pre committed, which helped stabilise expectations after the initial narrowing of the rate differential.

Mexican Peso Tests July-2024 Highs

The Canadian dollar weakened toward 1.39 per US dollar, rebounding from a one month low near 1.391 reached on January 9th amid broad US dollar softness, but upside remains capped by weaker domestic labour signals and a more challenging oil backdrop. The recent pullback in the greenback was driven by renewed concerns over Federal Reserve independence following reports of a Justice Department inquiry into Chair Jerome Powell, alongside expectations for additional Fed rate cuts after December nonfarm payrolls undershot forecasts. At home, Canada’s unemployment rate rose to 6.8% as labour force participation increased and hiring slowed, reinforcing the Bank of Canada’s assessment that policy is already sufficiently restrictive at 2.25%. Meanwhile, crude prices have failed to deliver meaningful support to Canada’s terms of trade, with WTI holding in the high 50s per barrel and heavy Canadian sour grades trading at a double digit discount, compressing export revenues and limiting CAD upside.

Canadian Dollar Rebounds from 1-Month Low

The Swiss franc strengthened to around 0.797 per USD, holding close to 2011-highs, supported by safe-haven demand on rising geopolitical tensions and concerns over the US central bank's independence. Trump warned Iran against using force on protesters and hinted at possible action if the crackdown escalates, while Iranian officials warned against US or Israeli intervention. Meanwhile, the UK and Germany are considering a stronger military presence in Greenland, with Germany proposing a joint NATO mission amid Trump’s renewed remarks on US claims to Greenland. Moreover, tensions flared between the US administration and the Federal Reserve after the White House threatened to indict Jerome Powell over his congressional remarks on Fed building cost overruns. Powell, in an unprecedented response, called the move a “pretext” to exert greater control over monetary policy.

Swiss Franc Firms

The Chinese Yuan touched 6.97 against the USD, the highest since May 2023. Over the past 4 weeks, US Dollar Chinese Yuan lost 1.09%, and in the last 12 months, it decreased 5.19%.

Chinese Yuan Hits 31-month High

The British pound rose toward $1.35, approaching last week’s more than three-month high of $1.357, as investors sold the dollar amid concerns over the Fed’s independence. Fed Chair Jerome Powell said on Sunday that the US Department of Justice had subpoenaed the Fed on Friday over headquarters cost overruns, calling the probe a pretext in President Trump’s ongoing push to pressure the central bank to cut interest rates. Investors also awaited key data this week, including UK monthly GDP figures. In other economic news, a survey by the Recruitment & Employment Confederation and KPMG showed UK employers scaled back hiring in December as businesses contended with rising costs and weak sentiment following Labour’s November 26 tax-raising budget.

Pound Gains as Dollar Weakens Amid Fed Concerns

The euro climbed toward $1.17, recovering from a one-month low hit last week, as investors sold the dollar amid concerns over the Fed’s independence. Fed Chair Jerome Powell said on Sunday that the Justice Department had subpoenaed the Fed on Friday over headquarters cost overruns, calling the probe a pretext for President Trump’s push to pressure the central bank to cut rates. Investors also awaited key data this week, including Germany’s 2025 GDP figures and US consumer price inflation, for further guidance on the monetary policy outlook. Last week, weaker-than-expected Eurozone CPI data reduced bets on an interest rate hike by the ECB this year.

Euro Rebounds as Dollar Weakens Amid Fed Concerns

The Indian rupee slipped to around 90.2 per dollar, retreating after a muted performance as ongoing foreign outflows and policy tensions continued to weigh on the currency. Bank of India interventions last week to curb speculative long-dollar positions offered only limited relief, leaving the rupee vulnerable to further depreciation. Domestic debt markets added to pressure, with Indian states announcing plans to borrow INR 5 trillion in Q1 and the federal government issuing over INR 3 trillion, the largest quarterly supply on record, pushing yields higher and widening spreads between state and central government debt. Traders are closely monitoring RBI liquidity operations, including planned bond purchases of INR 500 billion on January 12 and January 22. Separately, market sentiment was further dampened as escalating tensions between US President Donald Trump and Federal Reserve Chair Jerome Powell, which has added to market caution regarding global monetary policy.

Rupee Slips on Debt Supply and Policy Tensions

The Indonesian rupiah hovered around IDR 16,850 per dollar on Monday, extending its decline to a seventh straight session and remaining at its weakest since late April 2025. Sentiment remained fragile amid prospects of further monetary easing, as Bank Indonesia seeks to support economic growth while inflation stays manageable and within the central bank’s target range, following a total 150bps rate cut between September 2024 and September 2025. Adding to the cautious tone, consumer sentiment slipped in December after reaching a nine-month high previously, despite solid retail sales growth in November. Still, downside pressure on the rupiah was capped by Indonesia’s stronger external position, with forex reserves hitting a nine-month top in December. On the global front, the dollar index eased to around 98.9 after four sessions of gains, as traders weighed reports that US federal prosecutors had opened a criminal probe related to Senate testimony concerning Fed building renovations.

Rupiah Stays Weak as Downside Momentum Persists

The New Zealand dollar rose to around $0.574, rebounding modestly from a seven-week low, as a softer US dollar offered support while investors sought fresh monetary policy cues. The greenback came under pressure after Fed Chair Jerome Powell said the Trump administration had used legal threats, including subpoenas, reviving concerns over the Federal Reserve’s independence. Meanwhile, traders continued to assess the Reserve Bank of New Zealand’s outlook for potential rate hikes, with attention turning to the Q4 CPI data due next week. The central bank has recently signaled a prolonged pause, indicating that its rate-cutting cycle has likely concluded. However, Governor Anna Breman also pushed back against expectations of near-term tightening, saying borrowing costs are likely to remain unchanged for an extended period. Investors are expecting rates to remain on hold through the first half of 2026 and a hike not fully priced in until October.

New Zealand Dollar Rises

The offshore yuan strengthened to around 6.97 per dollar, near thirty-two-month highs, as confidence in the currency continued to build alongside falling hedging costs. One-year forward contracts now allow investors to lock in settlement rates below the current spot level, marking the lowest implied costs since 2022. Data also show a pickup in forward settlement activity at Chinese banks, reflecting rising demand to manage currency exposure. Additionally, exporters have been converting more of their dollar earnings into yuan, with banks recording sustained net FX selling on behalf of clients. The currency’s rally, about 5% over the past year and recently breaking the 7 per dollar mark, has been supported by broad dollar weakness, China’s strong trade surplus, improving economic conditions, and steady inflows ahead of the Lunar New Year. Central bank guidance through firmer daily fixings has also reinforced expectations that authorities remain comfortable with further yuan appreciation.

Yuan Rally Builds as Hedging Costs Fall

The South Korean won weakened to around 1,460 per dollar on Monday, extending losses near a three-week low, as markets remained cautious ahead of the Bank of Korea’s policy decision. With the central bank widely expected to hold rates steady this week, policymakers’ constraints from exchange-rate volatility and elevated housing prices leave little scope for near-term easing, keeping Korea’s yield disadvantage intact. Adding to the caution, authorities are monitoring rising US dollar deposits at domestic banks as households and firms step up hedging amid currency weakness. While the checks themselves are not a tightening measure, they underscore sensitivity around FX stability and highlight persistent demand for dollars, reinforcing near-term depreciation pressure. Meanwhile, the dollar eased modestly on the day, but expectations that US rates will remain higher for longer continued to cap any meaningful recovery in the won.

South Korean Won Extends Losses

The Japanese yen traded around 158 per dollar on Monday, holding at one-year lows, though moves were limited as local markets were closed for a holiday. Political uncertainty rose after Prime Minister Sanae Takaichi’s coalition partner suggested a snap election could be held on February 8 or 15. The currency also faced pressure from mixed economic data that complicated the Bank of Japan’s rate-hiking path. Last week, BOJ Governor Kazuo Ueda reiterated that the central bank would continue raising interest rates if economic and price developments move in line with forecasts, signaling a cautious but flexible approach to monetary policy. Investors now await a series of economic reports this week for further guidance, including current account figures, machine tool orders, producer inflation, and business sentiment data.

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