Most Asian currencies were largely muted on Wednesday after steady U.S. inflation data kept Federal Reserve rate-cut bets intact, while investors speculated over a possible snap election in Japan and assessed China’s trade balance figures.
The US Dollar Index rose 0.1% during Asia hours after gaining modestly overnight. US Dollar Index Futures also traded 0.1% higher as of 05:22 GMT.
Get premium insights on forex markets and key economic indicators with InvestingPro U.S. Consumer Price Index data released on Wednesday showed inflation running broadly in line with expectations, reinforcing the view that price pressures remain contained.
The relatively benign CPI cemented bets for at least two Federal Reserve cuts later in 2026.
Yen hits 1-1/2 yr low amid snap election bets The Japanese yen slumped to a one-and-a-half-year low against the U.S. dollar, with USD/JPY rising 0.2% to 159.45 yen, its highest level since June 2024.
Media reports stated that Japan’s Prime Minister Sanae Takaichi is preparing to inform her Cabinet of her intention to dissolve parliament later on Wednesday, with February 8 emerging as a possible date for a snap lower-house election.
Investors have focused on Takaichi’s pledges of expansionary fiscal policies -- including large stimulus packages aimed at boosting growth and tackling deflation -- which could further weigh on the yen by increasing government debt and delaying tighter monetary policy from the Bank of Japan.
The prospect of a politically driven fiscal push, dubbed the “Takaichi trade,” has added pressure to the currency in recent sessions.
China trade balance shows resilience in 2025 In China, December trade data released on Wednesday showed a robust surplus as exports exceeded expectations and imports grew at a healthy pace, suggesting resilient external demand and signs of strengthening domestic consumption.
For the full year 2025, the trade surplus swelled to a record $1.25 trillion, as disruptions to exports bound for the United States were largely offset by strong demand from other regions.
The Chinese yuan’s onshore pair USD/CNY was little changed, while the offshore pair USD/CNH ticked 0.1% higher.
Elsewhere, the South Korean won’s USD/KRW pair rose 0.2%, while the Singapore dollar’s USD/SGD traded flat.
The Indian rupee’s USD/INR pair fell 0.2% on Wednesday.
The Australian dollar’s AUD/USD pair rose 0.2%.
