Asia FX ticks lower as dollar firms ahead of Fed, BOJ rate decisions

Published 18/03/2025, 06:10

Investing.com-- Most Asian currencies edged lower on Tuesday as the U.S. dollar firmed ahead of the Federal Reserve’s interest rate decision, while investors also awaited the Bank of Japan’s policy meeting set to begin later in the day.

The US Dollar Index rose 0.2% to 103.59 in Asian trading as of 04:27 GMT, remaining slightly above a five-month low it reached last week.

US Dollar Index Futures were also 0.2% higher.

Fed rate decision looms, investors seek clarity on Trump tariffs

Market participants are keenly awaiting the Federal Reserve’s policy meeting starting on Tuesday, where interest rates are expected to remain steady. 

Investors will closely scrutinize the Fed’s commentary on recent trade policies, including tariffs imposed by the Trump administration, which have heightened fears of a potential recession.

Trump’s trade tariffs have pressured emerging Asian economies by weakening export demand, disrupting supply chains, and driving investors toward safer assets.

For the day, the Indonesian rupiah led losses, with the USD/IDR pair jumping 0.6%.

The rupiah declined despite a Reuters poll showing that Bank Indonesia is set to keep interest rates unchanged on Wednesday to shield the rupiah from further declines amid rising global trade tensions.

The South Korean won’s USD/KRW pair rose 0.3%, while the Singapore dollar’s USD/SGD gained 0.2%.

The Chinese yuan’s onshore USD/CNY, and offshore USD/CNH pairs, were both largely unchanged.

China unveiled on Sunday a comprehensive "special action plan" to bolster domestic consumption, aiming to invigorate economic growth amid recent challenges.

Elsewhere, the Australian dollar’s AUD/USD pair ticked 0.2% lower.

The Indian rupee’s USD/INR pair inched up 0.1%.

BOJ expected to hold rates unchanged on Wed

Additionally, the Bank of Japan is expected to hold rates steady at the end of its March 18–19 meeting, despite rising inflationary pressures, as officials remain concerned about rising trade tensions stemming from U.S. President Donald Trump’s tariffs.

The Japanese yen’s USD/JPY pair rose 0.3% ahead of the decision.

The BOJ increased rates by 25 percentage points in January. 

The central bank is expected to present a hawkish stance in this meeting amid the country’s spring wage talks with major unions and employers, which are set for another year of strong pay hikes.

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