Asian Currencies Rise as Fed Rate Cut Bets Pressure Dollar; Yen Leads on BOJ Hike Speculation
Most Asian currencies strengthened on Thursday, led by the Japanese yen, as the U.S. dollar weakened on expectations of a Federal Reserve interest rate cut in September.
The yen gained on speculation that the Bank of Japan will raise interest rates. This came after U.S. Treasury Secretary Scott Bessent warned that the BOJ was “behind the curve” in tackling inflation.
Asian Markets Benefit from Softer Dollar
A weaker dollar and improved risk appetite supported broader Asian markets. Investors are pricing in almost a 100% probability that the Fed will cut rates by 25 basis points in September, according to CME FedWatch.
However, optimism was tempered by concerns over U.S. tariffs. India is working to avoid steep duties on its exports to the U.S., adding uncertainty to trade sentiment.
Japanese Yen Outperforms
The USD/JPY fell 0.5% to 146.72 as yen strength increased on BOJ rate hike expectations. While BOJ Governor Kazuo Ueda has downplayed concerns about lagging behind on inflation, analysts now see a possible rate hike in September.
Japan’s second-quarter GDP data, due Friday, will provide further insight. Core inflation remains above the BOJ’s 2% target despite recent easing.
Dollar Weakens as Markets Price in September Cut
The U.S. dollar index and futures extended losses on Thursday, reflecting growing expectations of a September Fed rate cut. Signs of cooling U.S. inflation and slower jobs growth have reinforced this outlook.
Other Asian Currency Moves
- The Chinese yuan extended declines after the U.S. and China agreed to a 90-day trade truce extension.
- The Australian dollar edged higher despite labor market growth missing expectations, fueling speculation of more Reserve Bank rate cuts.
- The Singapore dollar remained steady, while the South Korean won gained 0.4%.
- The Indian rupee stabilized after last week’s record lows, but U.S. tariff threats over Russian oil imports kept sentiment cautious.
Geopolitical Watch
U.S. President Donald Trump is scheduled to meet Russian President Vladimir Putin in Alaska on Friday to discuss the Ukraine conflict, with talks also expected to cover Russia’s oil sector.
