Asian stocks mixed; dollar weakens before Fed rate decision

Synopsis

Asian currencies strengthened as the dollar weakened to a four-year low, driven by investor caution over unpredictable US policymaking. The dollar's decline accelerated after President Trump expressed indifference to its fall, fueling speculation about coordinated intervention. This backdrop precedes the Fed's interest-rate decision and a crucial week for megacap tech earnings.

Asian currencies gained as the dollar sank to levels last seen four years ago as investors turned cautious toward the world’s reserve currency amid unpredictable policymaking from Washington.

The Malaysian ringgit, Thai baht and the South Korean won all appreciated in early Asian trading after the Bloomberg Dollar Spot Index slid to its lowest since February 2022 during the US session. The dollar steadied after its biggest fall since April. The greenback’s decline had accelerated after President Donald Trump said he was not concerned about the weakening.

Asian stocks were mixed with South Korea rising and Japan falling. US equity-index futures extended gains as the Wall Street Journal reported SoftBank is in talks to invest up to $30 billion more in OpenAI.

The dollar’s weakness reflects uncertainty over policy from the Trump administration, including threats to take over Greenland and comments that have raised concerns about the Federal Reserve’s independence. That forms the backdrop as the Fed announces its interest-rate decision Wednesday, just as traders turn their attention to megacap technology earnings.

“The Trump administration is taking a calculated risk,” said Win Thin, chief economist at Bank of Nassau 1982 Ltd. “Foreign exchange typically is the leader in terms of showing market discomfort with a country’s policies and economic outlook, so this dollar weakness bears watching.”

The latest decline in the dollar also follows signs of US support to boost the yen, reopening speculation around the potential for coordinated currency intervention to guide the greenback lower against key trading partners.

Reports from traders Friday indicated that the Federal Reserve Bank of New York contacted financial institutions to check on the yen’s exchange rate — a preliminary step that’s often taken before interventions.

Meanwhile, Trump’s dollar comments added to an earlier slide in the greenback, which reflected a lack of confidence in the US economy partly due to his erratic tariff policy.

Speaking to reporters in Iowa, Trump said “the dollar is doing great.” When asked if he wants to see the currency decline more, he replied that he could have it go up or down “like a yo-yo.”

In other corners of the market, gold traded slightly below its record high and silver advanced. West Texas Intermediate crude also edged up. The commodities are all priced in dollars.

Treasuries were a touch stronger with the yield on the 10-year falling one basis point to 4.23% ahead of Wednesday’s Fed meeting. The central bank is projected to halt its rate-cutting cycle as a steadier jobs market restores a degree of consensus among officials after months of growing division.

With the economy still displaying exceptional strength, the Fed’s messaging is likely to emphasize a data‑driven approach to future policy decisions, according to Chris Brigati at SWBC. Also, the tone from this week’s earnings from the so-called ‘Magnificent Seven’ tech companies should be solid.

Around a third of S&P 500 companies by market capitalization report results this week. Microsoft Corp., Meta Platforms Inc. and Tesla Inc. report earnings on Wednesday, followed by Apple Inc. on Thursday. Alphabet Inc., by far the best performer among megacaps last year, reports on Feb. 4. Results from Amazon.com Inc. land on Feb. 5 and Nvidia Corp.’s on Feb. 25.

“This week is pivotal in setting the market’s near‑term tone as 2026 progresses,” Brigati noted. “History shows that a strong January often frames the narrative for the rest of the year, with investor psychology playing an outsized role.”

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