Anna 
Most Asian currencies experienced limited movements on Monday, with the dollar ticking lower in anticipation of significant economic cues scheduled for the week. The Japanese yen firmed from near two-month lows ahead of the Bank of Japan (BOJ) meeting. Lingering concerns over China contributed to muted sentiment in Asian markets, particularly after the People’s Bank of China kept its benchmark loan prime rate at record lows.
The yuan saw minimal movement in onshore trade, while the offshore yuan crossed the 7.2 level against the dollar. Profit-taking impacted the dollar after a strong start to the year, with a robust outlook as traders factor in the possibility of higher U.S. interest rates for an extended period. This expectation had weighed on most Asian currencies in recent weeks.
The Japanese yen, initially affected by expectations of elevated U.S. rates, exhibited some strength on Monday, rising 0.2% from its recent lows. The focus is on the BOJ meeting on Tuesday, where the central bank is expected to maintain its ultra-dovish policy with negative interest rates and yield curve control mechanisms.
Analysts anticipate minimal changes to the BOJ’s stance, especially amid heightened uncertainty over the Japanese economy following a recent earthquake. Softening inflation and sluggish wage growth are expected to relieve pressure on the BOJ from considering policy tightening.
Other Asian currencies remained subdued, nursing losses from the start of the year. The Australian dollar stabilized after reaching a two-month low, while the South Korean won lost 0.2%, staying near a three-month low. South Korean GDP data for the fourth quarter is scheduled for release on Thursday.
The Singapore dollar steadied near two-month lows ahead of key inflation data later in the week. The Indian rupee showed minimal movement, with local markets closed for a special holiday. Traders remained watchful for potential communal violence tied to the inauguration of a controversial temple in North India.
The dollar index and dollar index futures both retreated 0.1% in Asian trade, moving away from recent one-month highs amid profit-taking. Markets, as indicated by the CME Fedwatch tool, are now pricing in a higher chance of no changes to U.S. interest rates in March, a significant shift from earlier expectations for a cut.
Investor focus this week is on key economic cues from the largest economy, including fourth-quarter GDP data and PCE price index data, the Fed’s preferred inflation gauge, scheduled for Friday. Any signs of persistent inflation could influence the Fed to maintain higher interest rates for an extended period.
