Asian currencies held steady Wednesday after U.S. inflation met forecasts, keeping Federal Reserve rate cut expectations intact. The dollar edged higher, with investors now pivoting focus to a potential snap election in Japan and fresh trade figures from China that offered mixed signals for regional markets.

The Japanese yen weakened to a 1-1/2-year low against the dollar, slipping to 159.45. Prime Minister Sanae Takaichi is reportedly preparing to dissolve parliament for a snap election, fueling bets on expansionary fiscal policy. Markets fear this 'Takaichi trade' will increase government debt and delay Bank of Japan tightening.

China's December trade balance impressed with a robust surplus, as exports topped expectations and imports grew. For all of 2025, the surplus hit a record $1.25 trillion, showing external demand stayed strong despite disruptions. The yuan barely moved on the news, while the South Korean won and Indian rupee also drifted.