Forex News

The offshore yuan weakened to around 7.28 per dollar, extending losses from the previous session, as investors grappled with concerns over heightened tariff threats from US President Donald Trump. Late Monday, Trump announced plans to impose tariffs on key imports, including computer chips, pharmaceuticals, and steel, to boost US manufacturing. These developments have intensified fears of escalating trade tensions, adding pressure on the yuan amid an already slowing domestic economy highlighted by weak recent PMI data. Latest data showed that China's factory activity unexpectedly contracted to 49.1 in January, below the 50.1 forecast, while services slowed sharply to 50.2, down from December's 9-month high of 52.2. Meanwhile, the PBOC injected a record 1.7 trillion yuan ($234 billion) into the financial system in January via three- and six-month reverse repos, prioritizing yuan stability over further policy easing, marking the largest operation since the tool's introduction in October.

The New Zealand dollar extended its decline to around $0.565 on Tuesday, continuing its pullback from a five-week high as the US dollar rebounded following President Donald Trump’s fresh tariff threats. On Monday, Trump announced plans to impose tariffs on imported chips, pharmaceuticals, steel, aluminum, and copper to boost domestic production. Traders also remain on edge as the February 1 deadline for the initial round of tariffs approaches, targeting countries including China, New Zealand’s largest trading partner. Additionally, the ongoing global sell-off in tech stocks has further hurt risk sentiment, driven by concerns over US dominance in AI. This, coupled with dovish expectations for the Reserve Bank of New Zealand, has weighed heavily on the currency. Swap markets are now pricing in nearly a 90% chance of another 50 bps rate cut in February, with the RBNZ expected to lower rates by a total of 100 bps by 2025.

Gold held its recent decline at around $2,730 per ounce on Tuesday as traders awaited the Federal Reserve’s two-day policy meeting, which begins later today. With the central bank expected to keep interest rates steady, focus will be on Fed Chair Jerome Powell's speech and how the central bank will respond to President Donald Trump's calls for interest rate reductions. Gold's appeal as an inflation hedge could be reduced if Trump's policies, which are seen as inflationary, lead the Fed to keep rates elevated. Additional downward pressure came from a rising U.S. dollar as markets reacted to Trump’s latest tariff threats. The precious metal dropped 1.1% in the prior session amid a broader market sell-off after Chinese AI startup DeepSeek sparked a massive rout in tech stocks.

The Australian dollar weakened to around $0.625 on Tuesday, slipping for the second consecutive session as the US dollar gained momentum following fresh tariff threats from US President Donald Trump. Trump announced plans to impose tariffs on imported chips, pharmaceuticals, steel, aluminum, and copper to encourage domestic production. Risk aversion in global markets also weighed on the Aussie, as concerns over Chinese startup DeepSeek’s free open-source AI model challenging the dominance of US AI leaders sparked a selloff in US tech stocks. On the domestic front, data showed an improvement in Australian business confidence in December. Investors are now focused on upcoming local inflation figures, which could strengthen expectations for a potential rate cut from the Reserve Bank of Australia in February.

The Japanese yen fell below 155.5 per dollar on Tuesday, retreating from six-week highs as the dollar rebounded following fresh tariff threats from US President Donald Trump. Trump unveiled plans to impose tariffs on imported chips, pharmaceuticals, steel, aluminum, and copper to boost domestic production. The yen also reversed gains from the previous session, when concerns over Chinese startup DeepSeek’s free open-source AI model challenging the dominance of US AI leaders triggered a risk-off sentiment. Nevertheless, the yen remains supported by a hawkish outlook on Bank of Japan monetary policy. In January, the BOJ raised interest rates by 25 basis points to 0.5%, marking the highest short-term borrowing costs in 16 years. The central bank also forecast that inflation will hit its 2% target in the second half of its forecast period, signaling the potential for further rate hikes.

Shares in Hong Kong were little changed on Tuesday morning, hovering around 20,210 after gaining in the prior two sessions. Trading was notably sluggish, with markets set to close early as the Lunar New Year looms large. Meanwhile, US futures pulled back after a Monday sell-off on Wall Street fueled by mounting concerns over investment in the AI sector, following the emergence of Chinese startup DeepSeek. On the trade front, Hong Kong's export growth notched a 4-month high in December while imports fell for the first time in 10 months. For the week, the Hang Seng is on track to gain for the third session, up around 0.7% so far, supported by signs of institutional investors starting to flow into mainland stock markets as a result of Beijing's move last week to attract long-term capital from insurers and mutual funds. Xiaomi Corp. hit a record high, jumping over 2%. Meanwhile, China Cinda Asset Management slipped 3.4%, due to a weak earnings outlook.

The dollar index climbed above 107.8 on Tuesday, rebounding from six-week lows as President Donald Trump ramped up his tariff threats. Trump announced plans to impose tariffs on imported computer chips, pharmaceuticals, and steel, aiming to encourage domestic production of these goods. Traders also became more cautious as the February 1 deadline for the first round of tariffs, as previously outlined by the President, draws near. Meanwhile, the Federal Reserve began its two-day policy meeting on Tuesday, with expectations that it will hold interest rates steady despite Trump’s calls for immediate rate cuts. Investors are focusing on the central bank’s inflation outlook for signals on when the next rate cut may occur. The dollar strengthened against a range of currencies, with the biggest gains against the euro and yen.

WTI crude oil futures hovered around $73.2 per barrel on Tuesday after a sharp decline in the previous session, as traders remain focused on President Donald Trump’s wide-ranging set of tariffs. Trump said he'd impose tariffs on foreign-produced goods such as steel, aluminum, and copper in the near future, raising concerns over the potential ripple effects on global demand for commodities. Additionally, his Treasury Secretary, Scott Bessent, is reportedly backing gradual universal tariffs on U.S. imports starting at 2.5%. On Monday, crude prices slipped 2% amid a broad risk-off trade led by a slump in technology stocks, as well as weak manufacturing data from top oil importer China. While the migrant dispute between the U.S. and Colombia has been settled for now, Trump's tariff threats against China, Canada and Mexico, along with his calls for OPEC to lower prices and boost U.S. production, continue to weigh on market sentiment.

Top currency gainers are Afghan Afghani (2.91%) and Israeli New Sheqel (0.28%). Biggest losers are Laotian Kip (-1.39%), Tajikistani Somoni (-1.14%) and Georgian Lari (-1.09%).

Xiaomi increased to an all-time high of 37.85 HKD. Over the past 4 weeks, Xiaomi gained 7.69%, and in the last 12 months, it increased 178.95%.

Sony increased to a 4-week high of 3367.00 JPY. Over the past 4 weeks, Sony lost 0.21%, and in the last 12 months, it decreased 76.58%.

Mitsubishi UFJ Financial increased to an all-time high of 1964.00 JPY. Over the past 4 weeks, Mitsubishi UFJ Financial gained 6.28%, and in the last 12 months, it increased 43.42%.

The Nikkei 225 Index dropped 1.4% to around 39,000, while the broader Topix Index lost 0.6% to 2,740 on Tuesday, extending losses from the previous session. Chip-related stocks linked to the US AI value chain led the decline, following concerns that Chinese startup DeepSeek could challenge the dominance of US AI leaders. Local stocks also continued to be pressured by a hawkish stance from the Bank of Japan. On Friday, the central bank raised interest rates and revised its inflation forecasts higher, signaling the possibility of further rate hikes. Investors are now focused on upcoming labor, inflation, and other economic data for further guidance. Notable losses were seen in chip and AI-related companies, including Disco (-8.4%), Advantest (-9.1%), Tokyo Electron (-5.2%), Hitachi (-6.2%), and SoftBank Group (-5.4%).

The consumer confidence indicator in Pakistan increased to 38.0 in January 2025, up from 36.4 in December. It marked the highest reading since June 2024, as sentiments strengthened regarding current economic conditions (37.0 vs 36.4 in December), expected economic conditions (39.0 vs 36.3), income conditions over a year later (52.6 vs 48.5), and time to purchase durable goods (31.7 vs 30.9). In addition, concerns about unemployment over the next six months were lower (69.7 vs 72.1). Meanwhile, inflation expectations softened (68.1 vs 71.1), due to lower anticipated inflation for food (69.8 vs 73.2) and energy (70.0 vs 72.1).

Australia’s NAB business confidence index inched up to -2 in December 2024 from -3 in the prior month despite marking the second straight month of negative prints. Meanwhile, business conditions climbed (6 vs 3 in November), with strong activity during the year-end period. Sales (9 vs 6) and profitability (4 vs 0) rose solidly, and employment was a bit higher (4 vs 3). Conditions improved in all industries except transport and utilities, construction, and wholesale. There was a notable rise in retail, growing for first time since November 2023. Forward orders gained (-2 vs -5), with capex being flat (at 11) and capacity utilization up (82.8% vs 82.4%). Purchase cost growth rose again to 1.5% in quarterly equivalent terms, while labor cost growth edged down to 1.4%. Product price growth rose to 0.9% from 0.6%, and retail price growth added to 0.7%. "The survey continues to show some resilience in activity but also...a challenging cost environment," said NAB chief economist Alan Oster.

Hitachi decreased to a 18-week low of 3586.00 JPY. Over the past 4 weeks, Hitachi lost 1.45%, and in the last 12 months, it increased 70.4%.

US stock futures steadied on Tuesday following a sharp selloff in the previous session, particularly in artificial intelligence-related stocks, as concerns over a new AI competitor from China intensified. Chinese startup DeepSeek recently launched a free, open-source large language model that utilizes cheaper chips, less data, and lower energy consumption, sparking fears that US AI leaders could lose their competitive edge. On Monday, the S&P 500 and Nasdaq Composite tumbled 1.46% and 3.07%, respectively, with AI-focused stocks and those in the AI supply chain leading the decline. Notable drops included Nvidia (-17%), Broadcom (-17.4%), Oracle (-13.8%), Vertiv Holdings (-29.9%), and Vistra Corp (-28.3%). In contrast, the Dow gained 0.65%, buoyed by gains in defensive sectors amid falling bond yields. Investors now turn their attention to upcoming earnings reports, the latest Federal Reserve decision, and an important inflation reading later this week.