US warns on Asian currency devaluation
The US dollar was mostly lower overnight after comments from US Treasury Secretary Scott Bessent warning about recent weakness in key Asian currencies.
Bessent singled out both the Korean won and Japanese yen, saying “the recent depreciation of the Korean won…was not in line with Korea’s strong economic fundamentals.” He also noted that the US does not want “excess exchange rate volatility with Japan.”
The USD index fell from one-month highs, with losses in USD/JPY and USD/KRW driving the move. AUD/USD was steady, while NZD/USD gained 0.2%.
Fed’s Barkin sees inflation cooling
Richmond Fed President Tom Barkin said December inflation data looked “encouraging” after Tuesday’s report came in line with expectations. Headline annual CPI was reported at 2.7%.
Barkin noted that while prices remain above target, they are not accelerating. Unemployment has edged only slightly higher and remains manageable, he added.
He stressed the importance of anchoring inflation expectations while avoiding unnecessary damage to the labor market. Barkin also warned that tariffs could fuel longer-term inflation, even as businesses grow more confident navigating trade policy. Overall, his remarks underscored a flexible, data-driven stance: cooling inflation, steady labor dynamics, and a Fed willing to absorb short-term swings.
In Asia, the US dollar eased against the Singapore dollar as USD/SGD drifted from a one-week high. The pair remains 1.4% above its July 1 low of 1.2698. Next resistance levels sit near the 50-day average at 1.2903 and the 100-day average at 1.2922.
BoJ expected to hike twice as USD/JPY retreats from 18-month highs
The Japanese yen strengthened against the US dollar as USD/JPY fell from 18-month highs following Bessent’s comments. Former Bank of Japan executive director Kazuo Momma expects two rate hikes this year, taking the policy rate to 1.25% and possibly 1.5% in 2027, as the central bank works to prevent renewed yen weakness.
Speaking with Nippon.com, Momma said the BoJ must keep tightening—not because the economy is booming, but because Japan’s inflation norm has shifted to around 2%. That change, sparked by past commodity shocks and the yen’s sharp 2022 slide, has reshaped expectations and now anchors a cycle of wage and price adjustments.
Looking ahead, he sees inflation easing toward 2% in 2026 and real wages turning slightly positive as price pressures cool and wage growth holds near 2.5%. Still, purchasing power remains well below pre-COVID levels. Momma warned that external risks—from US monetary policy to oil markets—mean Japan’s recovery will be “mostly cloudy with occasional sun,” rather than a clear rebound.
Next key support levels lie at the 21-day EMA of 157.07, followed by the 50-day EMA of 155.75, where USD buyers may look to take advantage.
USD lower in Asia
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 12 – 16 Jan
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*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.
