investingLive Asia-Pac FX news wrap: Still rising Australian CPI boosts RBA rate hike bets

At a glance:

• US dollar retraced most of Tuesday’s Trump-driven sell-off

• BoJ minutes showed continued focus on yen weakness and labour-driven inflation

• Australian CPI surprised sharply higher, cementing expectations of an RBA hike

• AUD jumped back above US70¢ as rate pricing firmed

• China approved first imports of Nvidia’s H200 AI chips

The Asia–Pacific session revolved around three main themes.

First was how the US dollar would respond following President Trump’s punching down on the currency during the US session on Tuesday. While the dollar initially extended lower, a scan across major FX pairs shows that much of that move was retraced during the Asia session, suggesting limited follow-through selling once the initial shock faded. Gold, however, continued to rise.

Second were the December policy board minutes from the Bank of Japan. As a reminder, the BoJ ended 2025 much as it began, by delivering a 25bp rate hike, lifting the policy rate to 0.75%, the highest level since the mid-1990s. The minutes contained few major surprises. Policymakers reiterated concerns about the impact of a weak yen and persistent labour shortages on inflation dynamics. Several members highlighted the extent to which currency depreciation is feeding into underlying inflation, reinforcing the Bank’s readiness to tighten further if conditions warrant, while keeping the timing of any follow-up move firmly data-dependent.

The third, and most market-moving, development was Australian inflation data. Both Q4 2025 CPI and December monthly CPI came in hotter than expected. Headline CPI rose 3.8% y/y in December, up from 3.4% previously, while the trimmed mean, the RBA’s preferred core measure, climbed 0.9% q/q, above forecasts and the Bank’s own expectations. Annual core inflation lifted to 3.4%, well above the Reserve Bank of Australia’s 2–3% target band, with domestically generated inflation again the main culprit.

The Australian dollar responded positively, pushing back above US70¢, while market pricing for a 25bp RBA hike on February 3 rose to above 70%, from around 60% previously. Notably, all four major Australian banks now expect a February hike, with ANZ and Westpac joining earlier calls from CBA and NAB.

Elsewhere, China approved its first imports of Nvidia’s H200 AI chips, allocating several hundred thousand units to major domestic tech firms, a selective but notable shift as Beijing prioritises AI development.