Asian currencies rise as dollar weakens before Fed

Asian currencies witnessed gains as the US dollar sank to levels that were last seen four years ago on the back of investors turning cautious towards the latter amid unpredictable policymaking from Washington.

The Malaysian ringgit, South Korean won and the Thai baht all appreciated in early Asian trade post the Bloomberg Dollar Spot Index sliding to its lowest since February 2022 during the US session.

Meanwhile, the dollar steadied post its biggest fall since April last year. The greenback's decline had accelerated after US President Donald Trump said he wasn't concerned of its weakening.

Asian equities were mixed with Japan falling and South Korea rising.

The US equity-index futures extended its gas as the Wall Street Journal reported Softbank was in talks to invest up to $30 billion more in OpenAI.

The dollar’s weakness reflects uncertainty over policy from the Trump administration, including threats to take over Greenland and comments that have raised concerns about the Federal Reserve’s independence. That forms the backdrop as the Fed announces its interest-rate decision Wednesday, just as traders turn their attention to megacap technology earnings.

The latest decline in the dollar also follows signs of US support to boost the yen, reopening speculation around the potential for coordinated currency intervention to guide the greenback lower against key trading partners.

Reports from traders Friday indicated that the Federal Reserve Bank of New York contacted financial institutions to check on the yen’s exchange rate — a preliminary step that’s often taken before interventions.

Meanwhile, Trump’s dollar comments added to an earlier slide in the greenback, which reflected a lack of confidence in the US economy partly due to his erratic tariff policy.

Speaking to reporters in Iowa, Trump said “the dollar is doing great.” When asked if he wants to see the currency decline more, he replied that he could have it go up or down “like a yo-yo.”

In other corners of the market, gold traded slightly below its record high and silver advanced. West Texas Intermediate crude also edged up. The commodities are all priced in dollars.

Treasuries were a touch stronger with the yield on the 10-year falling one basis point to 4.23% ahead of Wednesday’s Fed meeting. The central bank is projected to halt its rate-cutting cycle as a steadier jobs market restores a degree of consensus among officials after months of growing division.

With the economy still displaying exceptional strength, the Fed’s messaging is likely to emphasize a data‑driven approach to future policy decisions, according to Chris Brigati at SWBC. Also, the tone from this week’s earnings from the so-called ‘Magnificent Seven’ tech companies should be solid.

Around a third of S&P 500 companies by market capitalization report results this week. Microsoft Corp., Meta Platforms Inc. and Tesla Inc. report earnings on Wednesday, followed by Apple Inc. on Thursday. Alphabet Inc., by far the best performer among megacaps last year, reports on February 4. Results from Amazon.com Inc. land on February 5 and Nvidia Corp.’s on February 25.

With inputs from Bloomberg

Also Read: Trade Setup for January 28: Nifty manages to hold 25,000 but key hurdles lay ahead of Budget