Asian markets saw gains on Tuesday, mirroring the positive trend from Wall Street. Some investors are optimistic that US President-elect Donald Trump might take a more moderate approach to tariffs than previously expected once he assumes office.
The Chinese yuan is facing major difficulties, hitting a 17-year low on Monday. Despite some signs of recovery, the currency remains fragile. This fragility is being exacerbated by the new US restrictions on Chinese companies, putting further pressure on the yuan.
Initially, the news caused stock market prices to rise and the dollar to fall, but President Trump’s subsequent denial on his Truth social platform allowed the US currency to partially recover.
ANZ’s head of Asia research, Khoon Goh, said it was unclear when tariffs and trade policies the Trump administration would implement.
Japanese Yen (USD/JPY): Increased by 0.4% reaching its highest level in nearly 6 months.
Australian Dollar (AUD/USD): Rose by 0.2%. The Consumer inflation data for November will be released on Wednesday.
South Korean Won (USD/KRW): Experienced a slight decline.
Indian Rupee (USD/INR): Stabilized after a sharp recovery from record highs above 86 rupees.
In early trading, MSCI’s broadest index of Asia-Pacific shares outside Japan Saw a 0.16% increase. Meanwhile, Nikkei Japan’s rose by 2% driven by gains in technology stocks.
The dollar was trading near a weekly low of 108.36, clawing back some of the previous session’s losses.
The Euro and pound both gave up some of their overnight gains, down 0.1%, with the euro trading at $1.0377 (RM 4.69) and the pound at 1.25085.
Eurozone inflation data due later on Tuesday will shape expectations for further rate cuts from the European Central Bank. Currently, markets expect close to 100 basis points of easing in 2025.
This week will be jam-packed with economic data releases, especially from the US, culminating with the December nonfarm payrolls report on Friday. ADP data on employment, job openings, and weekly jobless claims will be released in advance.
With markets already cutting their 2025 forecasts to just 40 basis points, positive data could suggest a smaller rate cut from the Federal Reserve. Minutes from the Fed’s latest meeting, due to be released on Wednesday, will feature speeches from several senior policymakers that will shed some light on the dot plot forecast.
The possibility of a less aggressive fed easing cycle has supported Treasury yields. The benchmark 10-year yield was at 4.6219%, its highest since May, while the two-year yield was steady at 4.2704%.
Elsewhere, the dollar Rose to a 6-month high of 158.425 yen against the yen. The Canadian dollar traded slightly weaker at 1.4345 to the U.S. dollar after rising on Monday after Canadian Prime Minister Justin Trudeau announced he plans to step down in the coming months. Macquarie global currency and rate strategist Thierry Wisman said the Canadian dollar will strengthen if an early election produces a conservative-led government, and he believes some Canadian outcomes are likely to improve under such a government.
In the commodity market, on Tuesday, oil prices edged lower, with Brent crude down 0.37% to $76.02 a barrel and U.S. crude down 0.46% to $73.2 a barrel. Spot gold rose 0.18% to $2,640.49 per ounce.
Additionally, the Euro and pound gave up some of their big overnight gains, by falling 0.1% each to trade at $1.0377 and $1.25085 in China, the CSI 300 index erased early losses to trade 0.12% higher while the Shanghai Composite index fell 0.09%.
- Chinese Yuan (CNY): The Chinese Yuan has strengthened recently after a period of instability. The People’s Bank of China (PBOC) has been active in stabilizing the currency and maintaining investor confidence. Trade frictions have negatively impacted China’s exports, but the stability of the yuan is evidence of the PBoC’s effective policies.
- Indian Rupee (INR): The Indian Rupee has shown resilience in the face of global uncertainty. Supported by strong foreign direct investment (FDI) and the robust domestic economy, the stability of the rupee reassured investors. However, concerns over inflation and external debt remain.
- South Korean Won (KRW): South Korea is highly dependent on exports and faces challenges due to weak demand and supply chain disruptions. The South Korean won stabilized after a brief devaluation as the government took steps to support exporters and control capital flows.
- Vietnamese Dong (VND): One of Asia’s past tense fastest growing economies, Vietnam has remained relatively isolated thanks to the strategic diversification of its export markets. The Vietnamese Dong has remained stable, reflecting Vietnam’s ability to adapt to trade steps to support exporters and control capital flows.