Traders were eyeing President Donald Trump’s State of the Union address this morning in Asia. The Australian dollar rose 0.3% to $0.7074 as rising inflation raised the risk of a rate hike – the biggest gainer in an otherwise steady start to the session.
The euro was at $1.1776 and sterling was sitting at $1.35. The yen fell 0.8% overnight to 156.28 against the dollar and was a fraction stronger than 155.88.
Takaichi raised concerns about an additional interest rate hike during his meeting with Bank of Japan Governor Kazuo Ueda last week, the Mainichi daily reported on Tuesday, citing multiple unnamed sources.
If true, the report signals a potential friction over monetary policy that could complicate the BOJ’s plan to raise rates continuously and rekindle currency market concerns that Takaichi is looking to heat up the economy with lower interest rates and higher government spending.
Live events
“Its ‘hard stance’ was surprising and adds to concerns about FX weakness and policy changes being market-friendly,” said Bob Savage, head of market macro strategy at BNY.
“Intervention in conjunction with the US is a break for the JPY against the 160 mark and further volatility,” he said.
Separately, the Nikkei newspaper said on Tuesday that the U.S. led a so-called “rate check” in January that boosted the yen, casting some doubt on how deeply Japan is committed to shoring its currency.
The yen has been sliding for years due to Japan’s low interest rates and has been under pressure since Takaichi took office in October on concerns that it would further strain an overstretched national budget.
Elsewhere, the New Zealand dollar was higher at $0.5971, while China’s yuan was higher, posting its sharpest one-day gain in nine months of 0.35% on Tuesday. (CNY/)
The US Supreme Court striking down several of President Donald Trump’s hefty tariffs is likely to reduce overall tariffs on Chinese goods, analysts said, paving the way for further yuan appreciation.
The yuan, which has risen about 7% in ten months, hit 6.8766 to the dollar on Tuesday – its highest in nearly three years, and was held at 6.8778 in offshore trade.
“The fundamentals for our CNY appreciation view—the starting point of deep valuations and significant strength of the export sector—remain very much in place,” Goldman Sachs analysts said.
“While uncertainties remain, we believe the likelihood of President Trump imposing additional Section 301 tariffs on Chinese products ahead of his planned visit to China in late March is low.”
(You can now subscribe to our ETMarkets WhatsApp channel)
