Most Asian currencies depreciated versus a stronger dollar on Wednesday, hit by mounting concern over a protracted U.S. government shutdown, while the New Zealand dollar slumped after the central bank delivered an outsized rate cut.
In Tokyo, the yen tumbled to near eight-month lows after the victory of conservative LDP leader Sanae Takaichi, fuelling fears of renewed fiscal stimulus and dovish central bank bias.
The US Dollar Index climbed 0.3% to 98.9, its highest in about two months, as investors sought safe-haven assets amid little progress to reach a funding deal anytime soon.
The shutdown, now in its second week, clouded the outlook for U.S. economic data and investor sentiment, adding uncertainty around the Federal Reserve’s policy path.
With key releases delayed, market focus is now on minutes from the Fed’s latest meeting and comments from Chair Jerome Powell later this week.
Across Asia, most major currencies came under stress as dollar strength and risk aversion weighed.
The Singapore dollar’s USD/SGD edged up 0.2%, while the South Korean won’s USD/KRW rose 0.3%.
The Chinese yuan’s offshore pair USD/CNH was unchanged, while the Indian rupee’s USDINR ticked higher.
The Australian dollar’s AUD/USD fell 0.3%.
Yen weakens to eight-month lows after Takaichi win The Japanese yen weakened to its lowest since mid-February against the dollar, with the USD/JPY pair rising as much as 0.5% to 152.6 yen on Wednesday. The pair has jumped nearly 3.5% so far this week. The currency came under renewed pressure after Takaichi’s win in the ruling Liberal Democratic Party leadership race, which raised expectations of a return to aggressive fiscal stimulus reminiscent of “Abenomics.”
Investors scaled back bets on further Bank of Japan tightening, viewing Takaichi’s victory as a signal that monetary policy may remain accommodative for longer. Japanese government bond yields rose as markets priced in the possibility of larger fiscal spending.
"The JPY rates markets have now priced out a Bank of Japan rate hikes for this calendar year, and now see the next hike possibly only coming in March 2026," MUFG analysts said in a note.
The analysts added that softer wage data released on Wednesday and pushback from Takaichi’s economic advisers against near-term tightening are also undermining the case for a near-term yen rebound.
RBNZ delivers surprise 50 bps cut; kiwi dollar hits 6-mth low The New Zealand dollar’s NZD/USD pair fell nearly 1% to $0.57, hitting a six-month low.
The Reserve Bank of New Zealand cut its official cash rate by 50 basis points to 2.50% on Wednesday. Markets had expected a 25-point move.
The central bank said the decision was aimed at supporting faltering growth, and left the door open to further easing.
