Ahead Today
G3: US final Dec S&P global manufacturing PMI, eurozone manufacturing PMI
Asia: Manufacturing PMI for several Asian economies
Market Highlights
The US dollar index (DXY) remains relatively soft despite modest gains in recent sessions amid thin liquidity. US initial jobless claims fell to 199k for the week ended 27 December from 215k in the prior week, even as hiring shows signs of weakness. Markets are pricing in about 60bps of rate cuts in 2026 and none in 2027, leaving scope for more dovish repricing if hiring conditions deteriorate further.
Meanwhile, the yen continues to face pressure as fiscal sustainability concerns weigh on sentiment, potentially constraining the pace of BOJ policy rate normalization amid rising debt servicing costs. The Japanese government has approved its budget proposal for the next fiscal year, projecting a 6.2% increase in expenditure from the previous fiscal year’s initial budget, bringing total spending to JPY122.3 trillion. This expansion underscores fiscal challenges that could influence monetary policy dynamics and keep JPY vulnerable.
Regional FX
In the final week of 2026, the Thai baht was a notable underperformer in Asia, depreciating by 1.6% against the US dollar following government measures to inspect gold-related transactions. BOT Governor Vitai noted that online gold trading had contributed to the baht’s rally. Thailand’s visitor arrivals fell 7.2% yoy to 33 million in 2025, signalling softer tourism momentum.
Meanwhile, USDCNY broke below the key 7.00 psychological level, reinforcing strength in currencies closely tied to CNY moves, such as SGD and MYR.
In South Korea, exports surged 13.4%yoy in December, beating market expectations of 8.5%yoy growth. The strength was driven by robust semiconductor shipments, which jumped 43.2%yoy amid booming AI and data-centre investments, offsetting weakness in auto exports. This resilience in tech exports suggests momentum could remain strong in 2026, benefiting economies such as Taiwan and Malaysia.