**Asian Currencies Stabilize Amid U.S. Rate Outlook; Yuan Weakens on PMI Data**

**Investing.com** – On Thursday, most Asian currencies experienced subdued movements, staying within a flat-to-low range as traders reacted to expectations of slower U.S. interest rate cuts in 2025. This outlook has instilled caution among market participants, particularly towards regional currencies.

The Chinese yuan was one of the notable underperformers of the day. The USD/CNY pair climbed 0.3% to reach 7.3190 yuan, marking its highest level in over a year. Disappointing purchasing managers index (PMI) data pointed to a slowdown in China’s manufacturing sector, raising concerns about the durability of recent stimulus measures.

With regional trading volumes remaining limited—especially as major markets like Japan were closed for New Year holidays—the dollar managed to hold its ground. The greenback gained supportive momentum from the expectation that the Federal Reserve would proceed with a slower pace of rate cuts, alongside potential protectionist measures anticipated under the incoming U.S. administration.

**Yuan Challenges Amid Economic Doubts**

The Chinese yuan’s decline was fueled by recent PMI releases that indicated weaker growth in the manufacturing sector, with data from Caixin and government reports reflecting diminishing support from past stimulus efforts. As worries mount around an economic recovery in China, and with potential trade headwinds posed by U.S. policies, the yuan’s outlook remains precarious. However, analysts speculate that Beijing may introduce further fiscal stimulus to counteract these challenges.

**Mixed Performance for Regional Currencies**

The Asian currencies have faced significant losses throughout 2024, largely due to a shifting investor sentiment favoring the dollar amid expectations of slower U.S. rate cuts and anticipated protectionist policies.

The Japanese yen has been notably affected, trading sideways after reaching a five-month high of nearly 158 yen against the dollar. A dovish outlook from the Bank of Japan contributes to the currency’s weakened position.

In contrast, the South Korean won exhibited slight firmness on Thursday but continues to struggle with a nearly 15% increase in the USD/KRW pair over the year, weighed down by political turmoil.

The Singapore dollar saw a minor decline of 0.2% against the dollar, despite positive GDP growth figures—4% for 2024—outpacing expectations. However, the sharp slowdown in growth in the fourth quarter raised concerns over future economic prospects.

Meanwhile, the Australian dollar’s AUD/USD pair rose by 0.5% after previously hitting a more than one-year low. Conversely, the Indian rupee slipped 0.3% after recently breaching a record high of 86 rupees to the dollar earlier in the week.

**Market Outlook**

As traders look ahead, the focus remains on the interplay between U.S. monetary policy and regional developments. The weaker-than-expected data from China could prompt additional fiscal measures, while the ongoing geopolitical landscape may further influence currency valuations across Asia. Forex traders should closely monitor upcoming PMI releases and other economic indicators to gauge the economic landscape and adjust their strategies accordingly.

Image from Free Malaysia Today, licensed under CC BY 4.0.