Trading volumes across Asian foreign exchange markets remained light, with many investors away for the holidays

Most Asian currencies were subdued on Friday in thin year-end trading, while the U.S. dollar hovered near 12-week lows as investors assessed Japanese economic data and weighed expectations for future U.S. interest rate cuts.

Trading volumes across Asian foreign exchange markets remained light, with many investors away for the holidays.

The US Dollar Index, which measures the greenback against a basket of major currencies, was largely flat in Asia hours, trading near its lowest level since early October.

Dollar has weakened amid growing expectations that the Federal Reserve will further cut interest rates in 2026 as inflation cools. Lower U.S. Treasury yields have also weighed on the dollar, providing some support to Asian currencies despite the muted trading environment.

In Japan, the yen’s USD/JPY pair traded 0.2% higher. Data on Friday showed that consumer inflation in Tokyo eased in December from the previous month, but remained above the Bank of Japan’s target, leaving expectations for further rate hikes largely intact.

The data reinforced the view that the BOJ is still on a gradual path toward policy normalisation, even if the pace of tightening remains uncertain.

Additional figures showed Japan’s industrial production declined in November, highlighting continued weakness in the manufacturing sector amid soft global demand.

By contrast, retail sales rose, pointing to resilience in household consumption. The mixed data kept yen trading range-bound.

Elsewhere in the region, most Asian currencies moved in narrow ranges. The absence of fresh catalysts and the holiday-thinned market limited appetite for new positions.

The won’s USD/KRW dropped 0.3%, while Singapore’s USD/SGD ticked up 0.1%.

The Indian rupee’s USD/INR was largely unchanged.

In China, the yuan’s onshore pair USD/CNY was little changed, while the offshore pair USD/CNH ticked 0.1% higher.

The Australian dollar’s AUD/USD pair was also largely muted.