Following a heated U.S. presidential debate, most Asian currencies saw an uptick as the dollar took a step back. Investors turned their attention to key inflation data set to be released later in the day. The Japanese yen, in particular, emerged as one of the strongest currencies in this scenario, experiencing increased demand as a safe haven asset post-debate. This surge pushed the yen to its highest level since early January. Moreover, the yen received a boost from somewhat hawkish-leaning statements made by officials from the Bank of Japan.
While the broader Asian currencies saw gains amidst a softer dollar, regional markets were still reeling from significant losses due to decreased risk appetite in recent times. Both the dollar index and dollar index futures witnessed a dip of about 0.2% during Asian trading hours. The decline in the greenback was directly attributed to the intense presidential debate between Kamala Harris and Donald Trump. The debate heightened expectations for a fiercely contested 2024 presidential race, causing uncertainty in the markets due to the conflicting policy ideas advocated by the two candidates.
Among all Asian currencies, the yen emerged as the top performer, with the USDJPY pair experiencing a significant 0.8% drop to 141.38 yen – its lowest level since early January. The yen’s rally was fueled by safe-haven plays as anxiety around the U.S. election intensified after the debate. The currency also found support from hawkish comments made by BOJ member Junko Nakagawa, who reiterated the central bank’s commitment to raising interest rates if inflation aligns with forecasts. These remarks, coupled with previous signals from the BOJ, point towards a possible rate hike discussion at the upcoming BOJ meeting.
While the Chinese yuan’s USDCNY pair experienced a 0.1% drop, the currency remained under pressure as U.S. policymakers proposed additional trade restrictions against Beijing. The South Korean won’s USDKRW pair also fell by 0.3%, and the Singapore dollar’s USDSGD pair shed 0.2%. The Indian rupee’s USDINR pair stabilized around 84 rupees, while the Australian dollar’s AUDUSD pair remained flat following a decline from nine-month highs in the previous week.
The impact of the fiery U.S. presidential debate was felt across Asian currencies, with the yen emerging as a strong contender amidst market uncertainties. The upcoming inflation data and Federal Reserve meeting are expected to provide further insights into the future direction of these currencies, especially in the backdrop of global economic and political developments. Investors will closely monitor these events to navigate through the volatility and make informed decisions in the foreign exchange market.