Investing.com – Most Asian currencies rebounded on Friday as the dollar weakened following President Donald Trump’s call for interest rate cuts, while the Japanese yen regained ground after the Bank of Japan delivered an anticipated rate hike.
The BoJ increased interest rates by 25 basis points, while projecting that inflation will stay supported and close to its annual target in the years ahead.
The central bank indicated that it plans additional rate hikes if its economic outlook aligns with expectations in the coming months.
The BoJ was widely expected to raise rates as markets believed that recent inflation and wage data were encouraging and supported hike bets.
The Japanese yen’s USD/JPY fell 0.4%, after being slightly higher before the rate decision.
Dollar set for worst week in 2 months after Trump’s rate cut demand
Other regional currencies strengthened on Friday, while the dollar fell after Trump's call for the Federal Reserve to implement immediate interest rate cuts.
In his address to the World Economic Forum in Davos, Trump urged OPEC and other oil-producing nations to lower prices. According to him, this could lead to a swift resolution of the Russia-Ukraine conflict by cutting off financial support to Russia's military efforts.
"With oil prices going down, I'll demand that interest rates drop immediately, and likewise they should be dropping all over the world," Trump told the World Economic Forum on Thursday in Davos, Switzerland.
The US Dollar Index fell 0.3% during Asian trading on Friday, and was set for its worst week in two months. The dollar had fallen 1.2% at the start of the week after Trump's comments suggested a lenient approach toward tariffs.
Dollar Index Futures were also 0.3% lower.
Asia FX records sharp gains
With the falling dollar, and prospects of gradual imposition of U.S. tariffs, regional currencies took a sigh of relief on Friday with sharp gains.
The Chinese yuan’s onshore pair USD/CNY fell 0.4%, while the offshore pair USD/CNH declined 0.4%.
The Australian dollar’s AUD/USD pair jumped 0.5%.
The Singapore dollar’s USD/SGD pair fell 0.4%, while the Malaysian ringgit's USD/MYR pair slipped 0.6%
The Indian rupee’s USD/INR pair inched 0.2% lower, while the South Korean won’s USD/KRW pair fell 0.3%.