Major currency pairs show mixed performance

Meanwhile, the Bank of Japan continued to attract attention as investors parsed remarks from board members suggesting that the path to policy normalisation would remain gradual. The central bank reiterated its commitment to supporting economic recovery, even as inflation expectations remain above target. Despite this dovish tone, traders remained wary of possible FX interventions, particularly as USD/JPY approached levels that have previously drawn official action. The yen’s response was muted, although volatility ticked higher near session highs.

However, some caution emerged later in the session as crude oil prices slipped back from earlier highs, tempering enthusiasm in energy-linked currencies such as the Malaysian ringgit and Indonesian rupiah. The dip in oil came amid renewed speculation over global demand headwinds and rising US inventory data, which weighed on sentiment in commodity-exporting economies within Southeast Asia.

Meanwhile, the New Zealand dollar also found support, buoyed by a firming in dairy prices at the latest Global Dairy Trade auction. As dairy is New Zealand’s top export, traders interpreted the results as a sign of strengthening terms of trade, lending the kiwi some traction against other major currencies. NZD/USD touched intraday highs near 0.6115 before paring gains slightly as markets remained cautious around global risk appetite.

Regional economic data played a pivotal role in shaping sentiment during the Asian session. In Australia, March retail sales came in below forecasts, rising just 0.1% month-on-month versus expectations of 0.2%. While the soft print briefly weighed on the Aussie, underlying risk appetite and supportive commodity prices cushioned the downside. The Reserve Bank of Australia’s recent hawkish tone also continues to underpin AUD demand amid lingering inflation concerns.

Among the majors, the euro (EUR) held steady around 1.0740, while the pound (GBP) edged slightly higher to trade near 1.2515, reflecting investor caution ahead of upcoming UK GDP figures and continued dollar softness.

The Aussie dollar (AUD) saw modest gains during the Asian session, climbing to 0.6625 against the US dollar, up from Wednesday’s close near 0.6608. This move comes despite softer-than-expected domestic retail sales data, suggesting underlying resilience and demand for yield-supportive assets.

Asian central bank policy signals influence sentiment

In contrast, the People’s Bank of China maintained a steady hand, setting the daily yuan fixing slightly stronger than market expectations. This move was interpreted by analysts as a signal that Chinese authorities are prepared to curb excessive depreciation pressures on the yuan amid ongoing concerns over capital outflows and sluggish domestic demand. The USD/CNH pair remained range-bound but showed a slight bias lower during the session.

USD/JPY initially rose during early Asian hours, touching a high near 156.20, supported by persistent interest rate differentials and hawkish comments from US Federal Reserve officials overnight. However, the pair later pulled back slightly as Japanese authorities reiterated concerns over excessive yen weakness, suggesting the potential for further intervention if volatility increases.

Policy developments from several Asian central banks played a pivotal role in shaping market sentiment during Thursday’s session. The Reserve Bank of New Zealand’s latest Financial Stability Report, released early in the session, highlighted concerns over persistently high inflation and its potential impact on household debt levels. While no imminent policy shift was signalled, the RBNZ’s cautious tone reinforced expectations that interest rates will remain elevated for longer, lending mild support to the New Zealand dollar, which edged higher against both the Australian dollar and the US dollar.

The New Zealand dollar (NZD) traded firmly, holding above the 0.6000 handle, supported by optimism around China’s trade data and commodity price stability. NZD/USD touched a session high of 0.6027 before easing slightly.

In Southeast Asia, the Singapore dollar (SGD) and Malaysian ringgit (MYR) were little changed, with regional equity flows and USD trends providing modest direction. Local inflation data due later this week could inject some volatility as central banks weigh rate trajectories.

Commodities and risk sentiment drive regional currencies

The British pound edged slightly lower, with GBP/USD dipping below 1.2510 amid light trading volumes. Sterling lacked clear direction, as traders awaited key UK GDP figures due later in the week. Market participants remain focused on how the Bank of England will respond to recent mixed signals from the domestic economy.

The tone from regional central banks suggested a cautious approach to monetary policy, with inflation still a key consideration but growing awareness of downside risks to growth. This mix of signals contributed to a measured tone in currency markets during the Asian session, as traders balanced central bank commentary with broader macroeconomic developments.

The Japanese yen (JPY) continued to recover after last week’s suspected government intervention. USD/JPY dipped to 153.80 before stabilising above the 154.00 mark. Traders remain cautious, with the Bank of Japan’s silence on recent currency moves adding to speculation about further action if the yen weakens again.

Across the Tasman, New Zealand benefited from stronger-than-expected Chinese trade data, with exports up 8.8% year-on-year in April. As China remains a key trading partner, the NZD drew support from prospects of improving demand and stable commodity flows. Additionally, dairy futures held firm, adding confidence to exporters and bolstering broader sentiment for the Kiwi.

In Japan, traders remained focused on official silence surrounding suspected intervention last week. Market participants speculate that authorities may step in again should USD/JPY push higher, especially with wage inflation remaining subdued despite a tight labour market. Meanwhile, economic indicators out of Japan remain mixed, with leading indicators softening, increasing pressure on the Bank of Japan to justify its ultra-loose policy stance.

Currency performance highlights

Regional currencies in the Asia-Pacific were notably influenced by shifts in commodity prices and broader risk sentiment during Thursday’s session. The Australian dollar gained modestly, building on its recent resilience, as iron ore and copper prices ticked higher in overnight trading. Market participants cited optimism over sustained infrastructure demand in China and a modest recovery in global manufacturing activity as supportive of Australia’s key export commodities. These developments provided a constructive backdrop for the AUD, particularly against the yen and the euro.

Elsewhere, the Chinese yuan (CNY) traded in a narrow range, with the USD/CNY fixing set at 7.0964 by the PBoC—slightly firmer than market expectations, signalling the central bank’s intent to maintain stability amid geopolitical noise and mixed macro data.

The Australian dollar experienced modest gains, with AUD/USD climbing toward 0.6610, supported by improved sentiment in commodity markets and a generally risk-on tone in regional equities. Traders also noted that recent domestic economic data, including firmer-than-expected retail sales figures, provided a mild tailwind for the Aussie.

The Asian session saw a mixed performance among the major currency pairs, as market participants weighed divergent economic signals and positioned cautiously ahead of key data releases later in the global trading day. The US dollar traded in a relatively stable range, although some volatility was noted against the Japanese yen and the Australian dollar.

EUR/USD remained largely range-bound during the session, hovering around the 1.0780 level. Market participants appeared cautious ahead of upcoming Eurozone inflation data and comments from ECB policymakers, which could offer further clues on the future path of interest rates in the euro area.

Regional economic influences

Commodity trends and investor appetite for risk remained key drivers for regional forex movements, with the Australian and New Zealand dollars outperforming on the back of improved export outlooks, while other currencies moved in line with shifting market sentiment and commodity dynamics.

Risk sentiment across the region remained broadly constructive, underpinned by gains in Asian equity markets and easing concerns over US banking sector stability following positive earnings updates from major institutions. This risk-on mood favoured higher-beta currencies, including the South Korean won and the Singapore dollar, which both advanced modestly against the greenback. The won was further supported by continued foreign inflows into the local equity market, while the Singapore dollar benefited from a stabilisation in regional trade dynamics.

Elsewhere in the region, the Bank of Korea’s minutes from its latest policy meeting revealed a split among board members regarding the timing of future rate cuts. While inflation is showing signs of moderation, uncertainty over global growth and energy prices continues to cloud the outlook. The South Korean won saw modest gains, aided by a rebound in local equities and stronger-than-expected trade data.

The major currency pairs showed no clear unified trend, reflecting ongoing uncertainty in global markets and a preference for range trading ahead of high-impact events in the European and US sessions.

China’s central bank, the PBoC, maintained its cautious approach, setting the daily USD/CNY midpoint slightly stronger than markets had projected. With ongoing geopolitical tensions and uneven domestic recovery, the PBoC appears intent on anchoring expectations and discouraging excessive capital outflow. Traders are closely watching for any shift in stimulus policy as authorities continue walking a fine line between growth support and currency stability.