Investing.com – Most Asian currencies edged lower on Thursday, extending their subdued performance amid concerns over new U.S. tariffs under Donald Trump’s administration, while attention shifted to the Bank of Japan’s policy meeting set to begin later in the day.
The BoJ is widely expected to raise interest rates at the end of its two-day meeting on Friday.
Analysts believe that recent inflation and wage data have been encouraging and support the central bank's decision to raise interest rates.
Media reports have shown the BoJ will likely signal further interest rate hikes at its meeting if the economy maintains its recovery.
The Japanese yen’s USD/JPY was largely muted ahead of the rate decision.
Asia FX subdued on US tariff concerns
Other regional currencies were under pressure in anticipation of additional U.S. tariffs.
Following his inauguration on Monday, Trump signaled plans to impose 10% tariffs on Chinese imports starting February 1, and warned of potential levies on the European Union.
Regional currencies faced downward pressure. If enacted at their full scale, these tariffs could have a substantial impact on most Asian currencies, given the region's heavy dependence on trade with China.
The Chinese yuan’s onshore pair USD/CNY inched 0.1% higher, while the offshore pair USD/CNH was largely unchanged.
The Malaysian ringgit’s USD/MYR pair rose 0.2%, a day after the Bank Negara Malaysia held key interest rates steady for the 10th straight meeting.
The Australian dollar’s AUD/USD pair and the Singapore dollar’s USD/SGD pair were both largely muted.
The Indonesian rupiah’s USD/IDR pair and the Indian rupee’s USD/INR pair, inched 0.1% lower, each.
The South Korean won’s USD/KRW pair was slightly higher amid an ongoing political crisis in the country.
US dollar faces headwinds from gradual imposition of tariffs
The dollar has faced pressure as investors assess the economic consequences of Trump’s gradual implementation of tariffs.
The greenback had fallen more than 1% at the start of the week after Trump avoided details on tariffs, signaling they could come at a slower pace.
The US Dollar Index was largely muted during Asian trading, after ticking higher a day earlier. Dollar Index Futures inched 0.1% higher.
“Markets have continued to unwind USD longs as US Treasuries had another strong session, and a delay in tariff announcements is fuelling some tentative optimism,” ING analysts said in a recent note.