Most Asian currencies experienced a significant surge on Monday, driven by strong gains in the Japanese yen and Australian dollar. This rally coincided with the U.S. dollar reaching its lowest point in three years due to President Trump’s remarks regarding Federal Reserve leadership. Additionally, market watchers focused on China maintaining steady loan prime rates.

U.S. Dollar Index Declines

• Dollar Index: Decreased 1.2% to 98.18, marking a low point since March 2022.

• Triggering Factors: White House adviser Kevin Hassett confirmed that discussions are underway regarding the potential termination of Fed Chair Jerome Powell, raising concerns over the independence of the central bank.

• Market Context: Powell’s recent comments indicated that interest rates should remain lofty due to inflation driven by tariffs.

Notable Currency Movements

• Japanese Yen (USD/JPY): Fell 1.1%.

  • Japan’s core inflation rose to 3.2% year-on-year in March, complicating the Bank of Japan’s outlook.

• Australian Dollar (AUD/USD): Increased 0.8%.

• Singapore Dollar (USD/SGD): USD/SGD fell 0.5%.

• South Korean Won (USD/KRW): USD/KRW decreased 0.4%.

• Thai Baht (USD/THB): USD/THB fell 0.7%.

• Malaysian Ringgit (USD/MYR): USD/MYR dropped 0.8%.

• Indian Rupee (USD/INR): USD/INR down by 0.5%.

China’s LPR Decision

• Loan Prime Rates: The one-year LPR held at 3.10%, while the five-year rate remained at 3.60%.

• Policy Direction: This indicates that Beijing favors fiscal support over more monetary easing amid continuing tariff instabilities.

Factors Driving These Currency Moves

1. Fears Over Fed Independence: Speculation about potentially removing Powell calls into question the credibility of U.S. rate-setting.

2. Concerns Over Tariffs: High U.S. tariffs threaten to drive inflation and economic slowdown impacting overall market sentiment.

3. Monetary Divergence: Contrasting policies between China’s rate hold and Japan’s rising inflation present unique challenges for each currency.

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