In Asian trading on February 25, 2025, the U.S. dollar initially strengthened following President Trump’s confirmation of upcoming tariffs on Mexico and Canada. However, the dollar’s momentum faded, with the euro, Australian dollar, New Zealand dollar, British pound, and Canadian dollar all recovering from their lows.
Japan’s January services PPI data showed a rise of 3.1% year-on-year, up from 2.9% in December, leading USD/JPY to briefly surpass 150.30 before falling back below 150.00.
The Bank of Korea also made a widely anticipated move, lowering its benchmark rate from 3% to 2.75%.
Federal Reserve Bank of Chicago President Austan Goolsbee stated that the Fed is adopting a “wait and see” approach regarding the impact of new administration policies on inflation.
In China, the People’s Bank of China drained 200 billion in its monthly Medium-term Lending Facility operation while keeping the MLF rate stable at 2%. Additionally, the central bank set its USD/CNY reference rate at its strongest point since January 20.
Chinese tech stocks experienced a near 5% drop but rebounded to positive territory within 90 minutes.
The dollar’s initial strength came as traders reacted to Donald’s tariff confirmations, but resistance emerged as other currencies clawed back losses. Traders initially sought safety in the greenback, but its edge faded as broader sentiment improved. The euro and commodity-linked currencies led the charge, recovering once the knee-jerk reaction settled. Sterling found buyers after hitting session lows, while the loonie benefited from steadier risk appetite.
Japan’s services inflation data brought a brief jolt to the yen pair, hinting at persistent pricing pressures in non-manufacturing sectors. USD/JPY breached 150.30 as the figures crossed, but momentum quickly reversed. That level has proven to be a magnet for official scrutiny in the past, making any sustained push above it uneasy ground. Traders faded the move, and with recent rhetoric from policymakers, speculation about intervention will remain present.
South Korea’s central bank acted within expectations, trimming its policy rate to 2.75%. The cut had been telegraphed, so won movements were measured. The bank’s statement leaned cautious, suggesting officials prefer a balanced approach as they gauge inflation risks.
Austan’s remarks reinforced the Fed’s hesitancy to commit to a policy shift too early. The wait-and-see stance, particularly amid tariff-related developments, indicates that officials are watching for any inflation persistence before adjusting course. Market participants took note, as pricing for rate cuts later in the year remained largely steady after his comments.
China’s central bank maintained its MLF rate, choosing instead to drain excess liquidity. That move suggests officials are walking a fine line—supporting growth without overstimulating. At the same time, the fixing of USD/CNY sent a message. By guiding the reference rate to its firmest in over a month, authorities signalled efforts to manage foreign exchange expectations.
Chinese tech shares endured a sharp sell-off but found dip buyers. After tumbling nearly 5%, funds moved in, flipping prices green within an hour and a half. The rapid reversal suggests sentiment remains fragile but far from outright bearish.
