Most Asian currencies moved higher on Friday and were on track to post weekly gains, while the US dollar remained under pressure near a three-month low.
The dollar failed to gain lasting support from the US Treasury’s expanded bond-buyback program, while Treasury yields resumed their climb.
US Dollar Nears Three-Month Low
The US Dollar Index fell around 0.2% to 98.735, leaving it close to a three-month low.
The index was also heading for a weekly decline of nearly 1%, providing support to several Asian currencies.
However, rising US Treasury yields limited some of the gains across regional foreign-exchange markets.
Treasury Yields Rise Despite Expanded Buybacks
Investors continued to question whether the US Treasury’s latest intervention would be enough to ease broader concerns surrounding the country’s fiscal outlook.
On Wednesday, the Treasury announced plans to double the size of certain buybacks of longer-dated government debt.
Beginning in September, the maximum size will increase from $2 billion to at least $4 billion per operation.
Treasury yields initially declined following the announcement. However, they soon reversed course.
The 10-year Treasury yield climbed back to around 4.70%, while the 30-year yield approached 5.25%.
Investors remain concerned about the large US fiscal deficit, increasing government borrowing and the continued rise in public debt.
Japanese Yen Supported by Inflation Data
The Japanese yen strengthened slightly, with USD/JPY falling around 0.1% toward 159 yen.
The currency pair was also heading for a weekly decline of roughly 0.2%.
Fresh inflation data showed that Japan’s core consumer price inflation accelerated to 1.8% year-on-year in July, up from 1.6% in June and in line with economists’ expectations.
Inflation excluding fresh food and energy also increased, reaching 1.9% from 1.7% in the previous month.
Bank of Japan Rate Hike Expectations Increase
The latest inflation figures strengthened expectations that the Bank of Japan could raise its policy rate from 1% to 1.25% at its September meeting.
However, core inflation remained below the BOJ’s 2% target for a seventh consecutive month.
Investors will therefore continue to monitor incoming inflation and economic data for further clues about the central bank’s next move.
Japan Manufacturing Activity Strengthens
Separate economic data showed that Japan’s private sector remained firmly in expansion territory.
The country’s manufacturing PMI improved in August, while new factory orders increased at their fastest pace since January 2018.
The stronger manufacturing figures added to signs that parts of the Japanese economy continue to perform well despite uncertainty surrounding global growth.
South Korean Won Leads Asian Currency Gains
The South Korean won was among the strongest-performing Asian currencies on Friday.
USD/KRW fell approximately 0.9%, reaching its lowest level since September 2025.
The pair was heading for a weekly decline of around 2.5%, reflecting strong gains in the won.
The Australian dollar also advanced, with AUD/USD rising about 0.4% and heading for a weekly gain of nearly 1%.
Chinese Yuan and Singapore Dollar Remain Stable
The Chinese yuan showed relatively little movement.
The onshore USD/CNY pair traded broadly flat, although it was heading for a weekly decline of around 0.3%.
Meanwhile, USD/SGD slipped approximately 0.2%. The pair remained on course for a weekly decline of about 0.7%, indicating moderate strength in the Singapore dollar.
Indian Rupee Bucks the Regional Trend
The Indian rupee remained under pressure, despite broader weakness in the US dollar.
USD/INR traded close to unchanged on Friday and was heading for a weekly gain of roughly 0.3%.
This performance contrasted with most other Asian currencies, which strengthened against the dollar during the week.
The rupee has faced pressure from higher crude oil prices and increased hedging demand from Indian importers.
Intervention from the Reserve Bank of India has so far provided only limited support.
Rising Oil Prices Add Pressure on Asian Economies
Higher oil prices remain another important factor for Asian currency markets.
Brent crude traded just below $94 per barrel after gaining more than 6% during the week.
Elevated oil prices can place additional pressure on major energy-importing economies, including India, by increasing import costs and potentially worsening trade balances.
Geopolitical tensions surrounding the US-Israeli conflict with Iran have continued to support crude prices.
Overall, the combination of a weaker US dollar and improving regional economic data has supported Asian currencies this week. However, rising Treasury yields, higher oil prices and continued uncertainty surrounding US fiscal policy could keep foreign-exchange markets volatile.
