Anna 
Asian currencies showed limited movement on Monday, with the dollar slightly declining, as investors turned their attention to upcoming economic readings and Federal Reserve comments for indications on potential interest rate adjustments. The situation was compounded by subdued risk appetite in the region, with a focus on any signs of further escalation in the Middle East conflict.
The Japanese yen experienced a 0.2% decline amid ongoing expectations that the Bank of Japan will maintain its ultra-dovish policy in its upcoming meeting. The anticipation of the Japanese consumer price index (CPI) data later in the week is for a sustained decline in inflation.
The Chinese yuan remained relatively stable after the People’s Bank of China (PBOC) unexpectedly kept medium-term lending rates unchanged. This decision suggested no imminent changes to the PBOC’s benchmark loan prime rate later in January, providing some support to the yuan. However, concerns persist over the limited room for the PBOC to further ease monetary policy.
Broader Asian currencies exhibited minimal movement as markets sought more clarity on the trajectory of U.S. monetary policy. The Australian dollar saw a modest 0.1% rise, while the South Korean won dipped 0.6%. The Taiwan dollar remained static after the Democratic Progressive Party’s victory in the presidential elections over the weekend, drawing criticism from China.
The Indian rupee stabilized after recovering from near-record lows last week, and investors awaited Indian wholesale price index inflation data. The dollar index and dollar index futures both registered a 0.1% decline in Asian trade, reflecting sustained expectations of early interest rate cuts by the Federal Reserve. Market participants are closely monitoring addresses from various Fed officials this week for insights into the central bank’s plans.
U.S. retail sales data later in the week will also play a crucial role in shaping the country’s inflation outlook.
