Asian currencies showed mixed performance Friday, with the Australian dollar surging toward a strong monthly gain while the Japanese yen weakened amid uncertainty over the Bank of Japan's next rate hike. The Chinese yuan also declined after Beijing cut a key reserve rate to facilitate dollar buying, following months of appreciation. The U.S. dollar index rose 0.15%, extending February gains as investors parsed mixed signals on regional interest rates.

The yen fell 0.2% Friday and was set for a 0.7% monthly decline, pressured by soft Tokyo inflation data showing core CPI falling below the BOJ's 2% target for the first time in nearly four years. This trend could limit the central bank's ability to raise rates, especially after Prime Minister Sanae Takaichi's ruling coalition won a supermajority, potentially paving the way for fiscal stimulus. Meanwhile, the yuan's pair rose 0.2% after the People's Bank of China scrapped a foreign exchange risk ratio, signaling possible intervention to limit further appreciation that could hurt exporters.

The Australian dollar's pair rose 0.25% and was headed for a 2.3% monthly gain, driven by hawkish Reserve Bank expectations following a 25 basis point rate hike and hotter-than-expected January inflation. Broader Asian currencies mostly weakened, with the South Korean won down 1.3% for February and the Indian rupee still down 0.8% despite recent firming.