Most Asian currencies traded lower on Thursday, while the U.S. dollar strengthened amid rising concerns that Washington could impose new trade restrictions on China, fueling fears of a renewed U.S.–China trade war.
The Japanese yen led losses, sliding to its weakest level in over a week as markets anticipated fresh fiscal and monetary stimulus under new Prime Minister Sanae Takaichi. The yen’s decline added to broader regional weakness.
Meanwhile, a new round of U.S. sanctions on Russia’s top oil companies further dampened investor sentiment, reinforcing the risk-off tone across Asian markets.
The Chinese yuan held steady, with the USD/CNY pair hovering around 7.1241, supported by strong daily midpoint fixes from the People’s Bank of China. Still, worries over potential U.S. export curbs on Chinese tech and software persisted after reports said Washington may respond to Beijing’s rare earth export restrictions with tighter trade measures.
Those headlines overshadowed earlier reassurances from U.S. officials, who emphasized ongoing discussions with China and expressed hope to avoid a broader trade conflict.
Across the region, risk appetite weakened. The Australian dollar (AUD/USD) fell 0.1%, while the Singapore dollar (USD/SGD) gained 0.2%. The Taiwan dollar (USD/TWD) and Indian rupee (USD/INR) also weakened slightly. Reports indicated that India is nearing a trade deal with the U.S., which could reduce tariffs from their current 50% level.
The South Korean won (USD/KRW) fell 0.2%, even after the Bank of Korea held interest rates steady and warned against further monetary easing, citing a hot housing market and persistent inflation pressures.
The yen remained the day’s worst performer, with the USD/JPY rising 0.3% to a nine-day high. Analysts said investor sentiment toward Japan remains cautious as markets await September inflation data on Friday and the Bank of Japan’s late-October meeting. The BOJ has indicated it will continue raising rates if growth and inflation align with projections.
The U.S. dollar index gained between 0.1% and 0.2% during Asian trade, extending its weekly advance. Traders positioned ahead of Friday’s U.S. Consumer Price Index (CPI) report — the first key data release since the October government shutdown. The results are expected to guide the Federal Reserve’s next policy decision, with markets widely anticipating a 25-basis-point rate cut next week.
