Forex News

The Australian dollar stabilized around $0.626 on Wednesday, following heightened volatility in recent sessions, as investors continued to weigh the latest comments from US President Donald Trump. Late on Tuesday, Trump revealed that his team was considering a 10% tariff on Chinese imports starting February 1, raising concerns about a potential trade war. Given the close trading ties between Australia and China, any developments affecting China’s economy could have significant implications for Australian markets. Domestically, traders are closely watching next week’s quarterly inflation report, which could provide critical insights into the future direction of local interest rates. Speculation is growing that the Reserve Bank of Australia may begin cutting rates as early as next month.

Consumer prices in East Timor fell by 0.4% year-on-year in December 2024, quickening from a 0.2% decline in November and marking the second consecutive month of consumer deflation. Costs decreased further for alcohol and tobacco (-3.2% vs -3.8% in November), housing (-0.7% vs -1.0%), furnishings, household equipment, and routine household maintenance (-1.2% vs -1.3%), transport (-2.4% vs -2.4%), and communication (-0.9% vs -0.9%). Meanwhile, food prices rose by 0.1%, significantly easing from a 0.5% gain in November and pointing to the slowest increase in nearly five years. At the same time, inflation remained stable for health (2.3%), recreation and culture (1.9%), and education (2%). On a monthly basis, consumer prices increased by 0.2%, reversing a 0.2% decline in November and noting the first monthly rise since May.

The offshore yuan depreciated past 7.28 per dollar, extending its losses from the previous session, as investors grappled with concerns over U.S. President Donald Trump's trade policies. Late on Tuesday, Trump announced plans to impose an additional 10% tariff on Chinese imports starting February 1, citing that China is supplying fentanyl to Mexico and Canada. While the proposed tariff is significantly lower than the 60% rate Trump had previously threatened, it aligned with the 10% pledge he made as president-elect. The announcement followed a recent phone call between Trump and Chinese President Xi Jinping, during which they discussed trade, fentanyl and other key issues. Earlier in the week, Trump also proposed a 25% tariff on imports from Mexico and Canada, reiterating their roles in enabling undocumented migration and the flow of drugs into the U.S.

The New Zealand dollar depreciated to around $0.565 on Wednesday as investors assessed the latest domestic inflation figures. New Zealand’s annual inflation rate held steady at 2% in the fourth quarter of 2024, slightly higher than expected but still within the Reserve Bank of New Zealand’s target range of 1-3%. On a quarterly basis, the CPI rose by 0.5%, easing slightly from a 0.6% increase in the previous period. The data suggested that price pressures remained largely contained, reinforcing expectations for a 50-bps rate cut at the central bank’s meeting in February. Additionally, U.S. President Donald Trump’s plan of imposing a 10% tariff on Chinese-made goods starting February 1st further weighed on the Kiwi dollar, given China is New Zealand’s largest trading partner.

The Japanese yen steadied around 155.6 per dollar on Wednesday, pausing its recent rally which was fueled by expectations that the Bank of Japan would raise interest rates this week following hawkish remarks from central bank officials. A rate hike would lift Japan’s short-term borrowing costs to 0.5%, the highest level since the 2008 global financial crisis. BOJ Governor Ueda recently indicated that the central bank would consider raising rates if the economy continues to perform well, while Deputy Governor Himino stated that it would be unusual for real interest rates to remain negative once Japan has moved past deflationary pressures. Meanwhile, traders continued to monitor the latest comments from US President Donald Trump, who threatened tariffs on China, Mexico, Canada, and the EU, heightening risks of a global trade war.

Gold rose toward $2,750 per ounce on Wednesday, extending a more than 1% gain from the previous session to reach its highest level since early November of last year. The metal has been supported by a relatively softer US dollar and growing demand for the safe-haven asset, as concerns over trade wars lingered following President Trump's announcement of potential tariff policies. Trump pledged to impose tariffs on the European Union and reiterated his consideration of a 10% tariff on China, following his earlier statement about prospects of imposing hefty levies on Canada and Mexico. Meanwhile, traders continued to assess inflation risks, as Trump’s policies were broadly seen as inflationary, potentially prompting the Federal Reserve to keep interest rates elevated for an extended period to control price pressures. This could dampen gold’s appeal, as higher rates increase the opportunity cost of holding non-yielding assets.

The Shanghai Composite dropped 1% to around 3,210 while the Shenzhen Component tumbled 1.1% to 10,185 on Wednesday, with the former hitting a one-week low after US President Donald Trump said his team was discussing a 10% tariff on goods imported from China that could take effect as early as Feb. 1. Trump’s comments overshadowed a more positive development from Friday, when he had an amicable phone call with Chinese President Xi Jinping, during which they discussed trade and fentanyl, among other topics. At the World Economic Forum, Chinese Vice Premier Ding Xuexiang emphasized that there are no winners in a trade war and called for greater international economic cooperation. Notable losses included Seres Group (-3.8%), ZTE Corp (-1.5%), East Money (-1.5%), Contemporary Amperex (-2.6%), and Fivocom Wireless (-4.4%).

The dollar index held around 108.1 on Wednesday, holding a recent decline amid lingering uncertainty on US President Donald Trump’s tariff plans. Trump indicated on Tuesday that he is considering a 10% tariff on goods imported from China, set to begin on February 1, just one day after threatening Mexico and Canada with tariffs of approximately 25%. However, none of these threats have been turned into policy yet, fueling hopes that the administration may take a more cautious approach to tariffs, which could help mitigate inflation risks. The dollar has been on an upward trajectory since October, driven by concerns that Trump’s "America First" policies and pro-growth stance might lead to higher inflation, potentially preventing the Federal Reserve from implementing further rate cuts. Despite this, markets still expect the Fed to lower rates by July, with the possibility of another reduction later in the year.

Top currency gainers are Afghan Afghani (1.44%), Macanese Pataca (0.57%) and Nepalese Rupee (0.57%). Biggest losers are Georgian Lari (-1.03%), New Taiwan Dollar (-0.38%) and Azerbaijani Manat (-0.29%).

Shares in Hong Kong slipped 319 points or 1.6% to 19,787 in early trade on Wednesday, ending gains in the prior six sessions after US President Trump said he could impose a 10% tariff on all Chinese imports after excluding China from the list of countries he planned to target immediately just a day earlier. The Hang Seng withdrew from its highest level in near four weeks, burdened by broad-based weakness. Still, gains on Wall Street overnight helped limit further losses, as Trump is expected to announce a new investment push for AI, led by big firms including Softbank Group Corp., OpenAI, and Oracle. At home, the annual inflation rate in Hong Kong was at 1.4% in December, keeping unchanged for the third month and staying at its lowest since May. Early laggards included KE Holdings (-3.2%), JD Logistics (-2.6%), and Longfor Group (-1.7%). Meantime, Geely Auto sank 1.8% despite planning to partner with Handal Motor to build a second-phase factory in Indonesia and start operation by Q3.

WTI crude oil futures traded below $76 per barrel on Wednesday, extending losses from recent sessions after US President Donald Trump reiterated his consideration of a 10% tariff on China, a top oil consumer. This amplified trade war concerns, following his statement a day earlier about potentially imposing hefty levies on Canada and Mexico. Markets also continued to assess the implications of Trump's pledges to boost oil production by declaring a national energy emergency to ease permitting, open up acreage, and reverse Biden-era clean energy policies. Meanwhile, recent US sanctions on Russia have disrupted physical oil and tanker markets, offering some carryover support to oil prices. Elsewhere, a winter storm swept across the US Gulf Coast on Tuesday, with North Dakota's oil production falling by 130 thousand to 160 thousand bpd, according to the state's pipeline authority.

The benchmark KOSPI rose 0.7% to around 2,537 points on Wednesday, reversing losses from the previous session, buoyed by Wall Street gains overnight following US President Donald Trump's less aggressive stance on tariffs. Meanwhile, South Korea's Industry Ministry met with businesses Wednesday to address US export risks under Trump’s second term and brief exporters on trade policies. Traders now braced for some major corporate earnings later this week. Among key stock indexes, chip giant SK Hynix and automaker Hyundai Motor advanced 0.2% and 0.7%, respectively, ahead of their earnings result due tomorrow. Notable gains were also seen from LG Energy Solutions (1.6%) and Samsung Biologics (2.8%). On the economic data front, South Korea’s consumer confidence edged up to 91.2 in January 2025 from 88.2 in December, reflecting a modest improvement in economic sentiment.

The Nikkei 225 Index jumped 1.4% to surpass 39,500, while the broader Topix Index gained 0.7% to 2,732 on Wednesday, reaching their highest levels in nearly two weeks and tracking gains on Wall Street overnight. The rally came as US President Donald Trump chose not to impose his tariff threats, offering relief to global markets. Despite the gains, investors remained cautious ahead of the Bank of Japan's upcoming monetary policy decision this week, with BOJ officials suggesting the possibility of a rate hike. Nearly all sectors participated in the rally, with notable gains from key index heavyweights, including Disco (+5.3%), Advantest (+3.4%), Fujikura (+4.7%), Nintendo (+2.5%), and Toyota Motor (+1.2%). SoftBank Group also soared 7.5% after Trump announced a significant AI infrastructure investment involving the company.

The Nikkei 225 Index jumped 1.4% to surpass 39,500, while the broader Topix Index gained 0.7% to 2,732 on Wednesday, reaching their highest levels in nearly two weeks and tracking gains on Wall Street overnight. The rally came as US President Donald Trump chose not to impose his tariff threats, offering relief to global markets. Despite the gains, investors remained cautious ahead of the Bank of Japan's upcoming monetary policy decision this week, with BOJ officials suggesting the possibility of a rate hike. Nearly all sectors participated in the rally, with notable gains from key index heavyweights, including Disco (+5.3%), Advantest (+3.4%), Fujikura (+4.7%), Nintendo (+2.5%), and Toyota Motor (+1.2%). SoftBank Group also soared 7.5% after Trump announced a significant AI infrastructure investment involving the company.

US stock futures rose on Wednesday following a strong market rally in the previous session, buoyed by relief over President Trump’s unexpectedly moderate trade measures on his first day in office. Trump announced he was considering a 25% tariff on Mexico and Canada and a 10% tariff on China, with the potential to take effect by Feb 1. Despite these proposals, the President held off on turning his threats into formal policy, even as he signed a series of executive orders. On Tuesday, in regular trading, the Dow surged 1.24%, the S&P 500 gained 0.88%, and the Nasdaq Composite rose 0.64%, with ten of the 11 S&P sectors finishing higher. In contrast, Apple fell 3.2% after two analyst downgrades. In after-hours trading, Oracle jumped 4% following Trump’s announcement of an AI infrastructure investment involving the company. Additionally, Netflix and United Airlines saw impressive gains, surging 14% and 4%, respectively, on strong quarterly results.

The Westpac-Melbourne Institute Leading Economic Index in Australia remained unchanged month-over-month in December 2024, following a 0.1% rise in the previous month. Meanwhile, the six-month annualized growth rate in the index, which indicates the likely pace of economic activity relative to the trend three to nine months into the future, declined to 0.25 in December from the prior 0.33, while staying positive for the second straight month. Westpac expects GDP growth to show a gradual improvement throughout 2025, reaching 2.2% yoy by year-end, a material improvement on the dismal 0.8% pace seen over the year to September 2024 but still a lackluster result. Meanwhile, further moderation in inflation is expected to clear the way for less restrictive interest rate settings eventually. However, the head of Australian Macro-Forecasting Matthew Hassan orojected the Reserve Bank of Australia to keep the official cash rate on hold in February with an easing more likely to commence in May.