The Asia-Pacific financial markets witnessed a rollercoaster week, with a mix of economic data releases and geopolitical tensions. Here's a recap of the key developments and their impact on various asset classes:
Australia's Jobs Data Dominates
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- The Reserve Bank of Australia (RBA) is now expected to raise interest rates earlier than anticipated, with a 50% chance of a February hike.
South Korea's Growth Disappointment
- South Korea's economy contracted by 0.3% quarter-on-quarter in Q4, significantly missing forecasts. This was driven by weaker investment, construction, and export growth.
- Despite the growth disappointment, South Korean equity markets surged. The Kospi index hit record highs, driven by strong gains in chipmakers, as improved global risk sentiment boosted investor confidence.
Japan's Mixed Bag
- Japan's exports rose for a fourth consecutive month in December, but growth missed forecasts. Shipments to the US, a key market, dropped sharply.
- Imports outpaced exports, narrowing the trade surplus. The US-Japan currency exchange rate, USD/JPY, remained volatile, trading above 158.60 as the week progressed.
- Japanese government bond yields stabilized after a sharp surge earlier in the week, with the Bank of Japan expected to maintain its current policy stance ahead of further normalization later this year.
Gold Consolidates
- Gold prices traded sideways around $4,800, consolidating after recent strong gains. Private and central bank demand for gold remains a key factor in its price action.
Regional FX Moves
- Shifting interest rate expectations and easing tariff rhetoric drove regional foreign exchange (FX) movements.
- The AUD's strength against the USD was a notable trend, influenced by the strong jobs data.
Other Notable Developments
- China's silver exports hit a 16-year high in 2025, despite concerns about export controls.
- Bridgewater, a prominent investment firm, remains bullish on China, citing a 45% gain in onshore funds.
- The People's Bank of China (PBOC) set a higher-than-expected USD/CNY reference rate, indicating potential intervention to support the yuan.
- Japan's December trade data showed a smaller-than-expected surplus, with import growth outpacing export growth.
- South Korea's economy contracted in Q4, with growth sharply missing forecasts, highlighting underlying macroeconomic weaknesses.
- Japan's bond market faced volatility due to Takaichi's tax cut pledge, testing fiscal trust.
- The International Energy Agency (IEA) lifted oil demand forecasts but warned of a persistent surplus in 2026.
