Asian currencies weakened on Monday, with the Japanese yen remaining under pressure despite rising expectations that the Bank of Japan will continue to lift interest rates. The dollar attracted increased demand as a safe asset following U.S. military moves in Venezuela.
The dollar’s strength was fueled by Washington’s weekend raid in Caracas, which resulted in the detention of President Nicolas Maduro and his transfer to New York. President Donald Trump also signaled that the U.S. could steer Venezuela’s political path until a new leadership is elected, adding to geopolitical unease and weighing on regional currencies, particularly the yen.
The USD/JPY pair pushed higher, trading near levels last seen in early 2025, even after BOJ Governor Kazuo Ueda reiterated that the bank will maintain a tightening path as long as inflation and economic momentum track internal projections. Markets treated the remarks as familiar, especially after the bank already raised rates by 25 basis points in its most recent meeting.
The yen continued to drift lower as prices approached ranges that had previously drawn government FX intervention. Still, traders questioned whether Tokyo has the fiscal space to conduct fresh interventions, given rising concerns over public spending, budget gaps, and debt sustainability.
The broader Asian FX slump stood in contrast to the Chinese yuan, which held firm near its strongest level in 2.5 years, supported by Beijing’s new consumer-spending incentives and an accommodating stance from the People’s Bank of China.
Overall, the combination of firm dollar flows and geopolitical tension kept Asian currencies defensive, with the yen reflecting ongoing skepticism over the speed and impact of Japan’s policy tightening relative to other major economies.
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