The yen’s USD/JPY pair dropped 0.2% to 156.87 yen

Most Asian currencies moved in a tight range on Monday, while the yen firmed slightly after the country’s finance ministry ramped up its warnings of currency market intervention.

But the yen still nursed recent losses on concerns over stretched government fiscal spending, with said concerns set to persist after Prime Minister Sanae Takaichi clocked a landslide victory in lower house elections held on Sunday.

Broader Asian currencies moved in a tight range, and were also nursing losses in recent weeks. Focus this week is on a host of key economic prints from China.

The yen’s USD/JPY pair dropped 0.2% to 156.87 yen, having earlier dropped 0.5%.

The currency, which still remained largely weak against the dollar, was buoyed by a series of warnings from Japanese officials that they may intervene in markets to support the battered currency.

Concerns over stretched fiscal spending in Japan were a major weight on the yen, having also sparked a deep selldown in Japanese government bonds earlier this year.

FX markets remain wary that a more expansionary fiscal stance could weigh on the JPY. Still, as USDJPY approaches 160, market caution over potential official pushback – via rate checks or even direct intervention – will likely intensify, OCBC analysts said in a note.

In Asia, the yuan’s USD/CNY pair dropped 0.1% and remained at lows last seen in mid-2023. The yuan firmed sharply in recent months amid continued support from the People’s Bank, which set a series of aggressively strong midpoints for the currency.

Chinese CPI data is due on Friday and is also set to offer more cues on the world’s second-largest economy, ahead of the Lunar New Year holidays.

The Australian dollar’s AUD/USD pair rose 0.2%, rising back above the $0.7 level as markets priced in more interest rate hikes by the Reserve Bank this year. The RBA had raised rates by 25 basis points last week and presented a hawkish outlook in the face of sticky inflation.

The Singapore dollar’s USD/SGD pair was flat, while the won’s USD/KRW pair added 0.2%.