Asia FX slides as Trump reaffirms tariffs, yen ticks up after Tokyo CPI

Most Asian currencies extended declines on Friday, as U.S. President Donald Trump reaffirmed his tariff timings, while the Japanese yen edged up after a strong inflation report from Tokyo.
The US Dollar Index rose 0.1% in Asian trading, as market participants cautiously awaited the release of personal consumption expenditures (PCE) price index, due later in the day, to gauge the Federal Reserve’s interest rate trajectory.
Trump reaffirms tariff timings, vows 10% extra levies on China
Trump on Thursday reaffirmed that, effective March 4, the U.S. will impose a 25% tariff on imports from Mexico and Canada, alongside an additional 10% tariff on Chinese goods, citing ongoing concerns over illicit drug inflows, particularly fentanyl.
Investors shifted toward the perceived safety of the U.S. dollar as a result of their concern that escalating trade tensions could impede economic growth in export-reliant Asian economies. The USD/IDR pair for the Indonesian rupiah increased by 0.8 percent, and the USD/KRW pair for the South Korean won increased by 0.7 percent, leading the declines in regional currencies against the US dollar. The Chinese yuan’s offshore USD/CNH and onshore USD/CNY pairs were marginally up.
The Australian dollar’s AUD/USD pair fell 0.2%.
The Malaysian ringgit’s USD/MYR pair jumped 0.5%, while the Indian rupee’s USD/INR pair gained 0.1%.
The Singapore dollar’s USD/SGD pair was largely unchanged.
Japanese yen rises as Tokyo CPI keeps BOJ rate-hike bets supported
The Japanese yen’s USD/JPY pair edged down 0.2%,
Tokyo’s core inflation rose 2.2% year-on-year in February, slowing from the 2.5% increase seen in January, according to data released on Friday.Despite the slight decline, inflation remained above the Bank of Japan’s 2% target for the fourth consecutive month, backing the Bank of Japan’s view of more rate hikes.
Meanwhile, Japan’s industrial production fell 1.1% in January from the previous month, aligning with market expectations.
At the same time, retail sales grew 3.9% year-on-year in January, matching estimates and highlighting steady consumer spending.
US PCE inflation data awaited for Fed rate outlook
Market participants await the upcoming release of the U.S. Personal Consumption Expenditures (PCE) inflation data on Friday, seeking insights into the Federal Reserve’s future interest rate decisions.
This anticipation follows last week’s weaker-than-expected services PMI and consumer sentiment figures, which have bolstered expectations for potential rate cuts. However, immediate rate reductions remain unlikely, as the Federal Reserve continues to assess the broader economic landscape. citeturn0search7
The data will also help gauge the future performance of the U.S. dollar, which has recently fallen on data showing weak economic growth.
“The dollar has come under some pressure on the back of the rerating of the US growth outlook and expectations that the Russia-Ukraine conflict is nearing an end. However, we expect US tariffs to regain centrality and drive the dollar sustainably higher,” ING analysts said in a note.