Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Trump kick-starts FX volatility
The Australian dollar ended back near one-month highs overnight after President Donald Trump’s first day of his second term was marked by a return of the FX volatility that characterized his first term.
The Australian dollar and other trade-focused FX initially jumped higher on the news that Trump would not introduce new tariffs in the initial swathe of executive orders. However, a later statement that the administration would announce tariffs on Mexico and Canada for 1 February saw these initial moves quickly reverse.
However, once the dust settled, the US dollar extended losses, with markets mostly focused on the fact that Trump declined to introduce new announced new tariffs and instead only announced a study into trade relationships.
The USD index ended Monday at the lowest closing level since 27 December and closed below the 21-day exponential moving average, a key measure of momentum, for the first time since 5 December.
The AUD/USD ended the session down 0.1% but remains broadly near one-month highs.
The NZD/USD was flat for the session with markets looking ahead to today’s NZ inflation reading. The market is looking for headline annual inflation to fall from 2.2% to 2.1%. NZ inflation is due at 10.45am NZDT (8.45am AEDT).
The USD/SGD gained 0.2% while USD/CNH climbed 0.1%.
BOJ meeting likely to see hike
This Friday will see the announcement of the BOJ’s monetary policy meeting as well as its outlook for price and economic activity with markets seeing an almost 90% chance of a rate hike to 0.50%.
Based on the meeting of branch general managers and Deputy Governor Ryozo Himino’s comments, we believe the BOJ will come to the conclusion that there is less ambiguity over FY25 wage raises and US government policies.
Although we do not anticipate the BOJ to accelerate interest rate hikes, we do believe it will increase its projections for CPI inflation to account for yen depreciation, rising oil costs, and rising rice prices.
The USD/JPY broke below pattern support around 156.00, confirming a short-term trend reversal. The next targets to the downside are 154.77, followed by 151.81.
Ringgit outperforms Asia, BNM to hold steady
Across Asia today, the Malaysian interest rate decision will be in focus.
In order to show that the present monetary posture is still beneficial to the economy, we anticipate that the BNM will adopt a neutral tone consistent with past meetings and leave its policy rate at 3%.
We believe that BNM will continue to see monetary accommodation as unnecessary as the GDP and inflation outlook is still largely consistent with its most recent assessment.
The Malaysian ringgit has performed relatively strongly in 2025. The MYR’s relative YTD flattish performance in Asia is supported by Malaysia’s improved trade balance, which is over the break-even mark for a positive basic balance of payments.
Next key support for USD/MYR is at 4.4608 handle.
Aussie closes near highs despite volatility
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 20 – 25 January
All times AEDT
Have a question? [email protected]
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
