Asian markets experienced varying currency movements on Thursday, with the yen strengthening amid low liquidity due to a Japanese holiday. USD/JPY decreased to just below 148.20, and EUR/JPY dropped under 161.75, although the yen later lost some gains after a statement from former U.S. President Donald Trump about interest rates.
New Zealand’s economy showed resilience with a 0.7% quarter-on-quarter GDP growth in the December period, supporting the notion that the country is recovering from its mid-2024 recession. The New Zealand dollar briefly rose but faltered, paralleling declines in the Australian dollar after a downturn in the Australian job market.
Australian Employment Decline
Australia reported a loss of over 50,000 jobs in February, and the participation rate decreased from 67.2% to 66.8%. Consequently, the unemployment rate remained stable at 4.1%, slightly easing to 4.05% when rounded. These figures could indicate potential interest rate cuts by the Reserve Bank of Australia, though they are based on a single month’s data.
In China, the People’s Bank of China maintained its 1- and 5-year Loan Prime Rates at 3.1% and 3.6%, remaining unchanged for five months. Despite expectations for stimulus, the central bank has not made adjustments since the last rate cut in September, indicating a cautious approach towards balancing growth and stability in the yuan.
The movements in Asian currencies on Thursday suggest that traders responded to both regional events and external commentary. The rise in the yen was likely exaggerated due to lower market participation caused by the Japanese public holiday, making price swings more unpredictable. The dip in USD/JPY and EUR/JPY reflected short-term buying of the Japanese currency, though this was later reversed when Trump weighed in on interest rates. His remarks, while not policy-setting, continue to affect sentiment, especially in currency markets sensitive to U.S. monetary policy expectations.
New Zealand’s economic figures showed that the country is emerging from last year’s recession and expanding at a relatively strong pace. The 0.7% GDP growth in the final quarter suggests that previous concerns about a prolonged downturn may have been overestimated. The New Zealand dollar initially gained support as markets acknowledged the economy’s resilience. However, the gains were not sustained, owing in part to weakness in Australia’s job figures.
China Holds Interest Rates
The employment data from Australia presented a mixed picture. A decline of more than 50,000 jobs in a single month is not a trend by itself but does raise questions about the labour market’s ability to absorb workers. While the participation rate dropped from 67.2% to 66.8%, the unemployment rate remained largely unchanged. The Reserve Bank of Australia will likely take a cautious approach before interpreting a single data point as reason to alter policy. Still, multiple weak reports in the coming months could force adjustments in interest rates. For now, traders will need to monitor domestic indicators alongside external developments that influence risk sentiment.
The People’s Bank of China left its key lending rates unchanged for the fifth consecutive month, prioritising stability despite ongoing speculation about additional stimulus. While some had expected policymakers to act more aggressively to support growth, reluctance to cut rates may reflect concerns about weakening the yuan. The central bank appears to be balancing internal economic momentum and external pressures on the currency. With no rate changes since September, any forthcoming adjustments will require clear shifts in economic data or financial conditions.
