Asia FX Steadies as Risk Appetite Improves; Barclays Sees Multi‑Year USD Momentum, RBI Steps In
Asian currencies and equities were broadly firmer in early trade as improved risk appetite and growing bets on near-term US rate cuts lifted sentiment, even as geopolitical frictions and policy uncertainty capped moves. Gold held around a key technical pivot and Bitcoin rebounded, while the Reserve Bank of India intervened to smooth rupee volatility. A bullish long-horizon call from Barclays on the US dollar added a cross-current for FX positioning.
Risk Tone Firms Across Asia Asian shares traded mostly higher, led by Chinese tech. Alibaba climbed 4.7%, tracking gains in broader consumer and internet names. Bitcoin rose 3.2% intraday following a bruising quarter, helping underpin broader risk sentiment in a session light on economic prints.
Liquidity flows were subdued by a regional data drought, but traders flagged improved risk tolerance as markets lean into the prospect of easier global monetary policy. That backdrop kept commodity FX better supported and pressured haven demand at the margin, though moves were measured ahead of upcoming interest rate decisions.
Barclays Flags Prolonged USD Strength Barclays said it expects the US dollar to strengthen into 2026, citing a powerful mix of massive AI-related capital expenditure, fading policy risks, and improving global risk sentiment. The bank argued that surging AI capex could be economically and geopolitically transformational, supporting sustained US growth differentials and yield dynamics that tend to favor the greenback.
If realized, the call implies a challenging environment for cyclical and high-beta currencies on multi-quarter horizons, even as near-term USD softness can emerge around dovish rate expectations and tactical risk-on phases. Market positioning may increasingly hedge for a two-speed scenario—short-term policy-led FX volatility against longer-term USD resilience tied to structural investment flows.
Gold Holds Near Pivot as Rate-Cut Bets Build Gold hovered near a closely watched technical pivot as traders priced a higher probability of Federal Reserve rate cuts, a setup that typically compresses real yields and supports bullion. Volatility could rise into major policy announcements, with traders wary of whipsaw risk should guidance underwhelm dovish expectations.
Crypto: Relief Bounce After Tough Quarter Bitcoin’s rebound comes after a 24.43% loss in the fourth quarter—its worst quarterly performance since 2018. Despite ongoing dip-buying signals, desks warned of potential bull traps given the market’s sensitivity to policy rhetoric and liquidity conditions. A clearer path on the Fed’s policy trajectory remains a key catalyst for more durable trend formation in crypto.
China–Japan Travel Strains Add Geopolitical Risk Regional risk was tempered by a surge in China–Japan flight cancellations as diplomatic tensions flare over Taiwan and maritime disputes. Reports suggest Beijing is tightening travel flows, which could exert incremental economic pressure on Japan’s services and tourism sectors. FX traders will watch for any spillover into the yen via safe-haven demand and for potential guidance from authorities.
Rupee Stabilized by RBI Intervention The Reserve Bank of India reported intervening in the foreign-exchange market to support the rupee, aiming to curb excess volatility and maintain orderly conditions. The action aligns with recent episodes of central bank smoothing in the region as policy makers navigate shifting USD liquidity and seasonal importer demand. Importer hedging interest remains elevated, with spot levels stabilizing post-intervention, according to traders.
Market Highlights – Asian equities mostly higher; Alibaba +4.7% as consumer and tech names outperformed – Bitcoin +3.2% intraday, but Q4 loss of 24.43% marks worst quarter since 2018 – Gold steady near a key pivot amid rising Fed rate-cut expectations – Barclays sees USD strength extending into 2026 on AI capex and improved risk sentiment – RBI intervenes to support the rupee; China–Japan flight cancellations jump on diplomatic strains
What to Watch – Upcoming interest rate decisions across major central banks and updated guidance on inflation and growth – US data flow for signs of cooling demand and its impact on yield curves and FX volatility – Geopolitical developments in North Asia and any impact on tourism, trade flows, and the yen – Crypto liquidity and positioning into policy events after a volatile quarter
Questions and Answers
What is driving Asia’s FX tone today? Improved risk appetite, supported by growing expectations for near-term US policy easing, lifted regional assets. Gains in Chinese tech and a crypto bounce helped, though geopolitical tensions and the Barclays USD call tempered aggressive FX positioning.
How could Barclays’ long USD view affect markets? If sustained, the thesis supports higher US growth and yield differentials that can underwrite USD strength over a multi-year horizon, challenging cyclical and EM FX. Short-term moves may still be dictated by rate expectations and data surprises.
Why did the RBI intervene? India’s central bank stepped in to reduce rupee volatility and maintain orderly market conditions amid shifting global dollar liquidity and seasonal FX demand from importers.
Is gold’s consolidation likely to hold? That hinges on policy guidance. A more dovish Fed path would typically support gold via lower real yields, but any hawkish surprise or stronger USD could quickly pressure bullion near key technical levels.
This article was produced for global market professionals by BPayNews.
