Dollar Weakness Shifts Market Focus Back to Japan

At the start of Asian trading, market attention was firmly focused on Japan, as economic data and policy signals once again played a key role in shaping sentiment. Japan’s Corporate Services Price Index (services-sector PPI) for November was released in line with expectations, holding at a relatively elevated annual rate of 2.7%. This reading confirms that underlying price pressures, particularly in the services sector, remain persistent across the Japanese economy.

At the same time, the Bank of Japan released the minutes from its October policy meeting. However, the report generated only a limited market reaction, as it relates to a period prior to the highly significant December decision, when the BoJ raised its short-term interest rate to the highest level seen in nearly 30 years. From a market perspective, the December move remains far more influential, marking a critical shift in Japan’s monetary policy stance.

In currency markets, broad-based weakness in the US dollar was the dominant driver of price action. The dollar index remained under pressure during thin holiday trading, extending losses seen earlier in the week. This environment allowed several G10 currencies to climb toward their daily highs, reinforcing the downward pressure on the greenback.

The Japanese yen continued its strengthening trend, supported not only by dollar weakness but also by increasingly cautionary remarks from Japanese officials, who have expressed dissatisfaction with excessive yen depreciation. Meanwhile, the Australian dollar also gained ground, while the euro and the British pound advanced toward their three-month highs, signaling continued pressure on the US dollar and a temporary shift in momentum in favor of major global currencies.