Asian Currencies Strengthen as Yuan Hits 10-Month High, Dollar Slips to 7-Week Low
Asian currencies edged higher on Tuesday, supported by a weaker U.S. dollar. The greenback sank to its lowest level in seven weeks after soft U.S. labor data last week increased expectations that the Federal Reserve will cut interest rates in September.
The Chinese yuan led regional gains, climbing to its strongest level in 10 months after the People’s Bank of China set its firmest midpoint in nearly a year. This move was seen as a signal of Beijing’s growing policy support to strengthen the currency.
Most Asian currencies started September on a positive note, while traders stayed cautious ahead of key U.S. inflation data due later this week.
Chinese Yuan at Multi-Month High
The yuan’s USD/CNY pair slipped 0.1% to 7.1242, touching its strongest level since November 2024. Analysts from Goldman Sachs noted that the yuan’s recent gains were largely driven by policy rather than pure market forces. Beijing is expected to continue propping up the yuan, given its influence as a benchmark for several Asian economies.
A stronger yuan, combined with a softer dollar, makes U.S. exports to China more competitive. Beijing may be encouraging this trend as a way to boost trade flows, which helped the yuan post solid gains through August and into early September.
Broader Asian FX Performance
Other Asian currencies also advanced. The Japanese yen’s USD/JPY pair fell 0.1%, following volatility sparked by Prime Minister Shigeru Ishiba’s surprise resignation. The political uncertainty is expected to delay further interest rate hikes by the Bank of Japan.
The Australian dollar’s AUD/USD pair added 0.1% to reach a seven-week high, even as consumer sentiment surveys showed weakness amid sluggish growth and rate concerns.
The Singapore dollar and South Korean won also strengthened slightly, with USD/SGD edging lower and USD/KRW up 0.2%.
By contrast, the Indonesian rupiah weakened sharply after Finance Minister Sri Mulyani Indrawati was abruptly removed from office. The central bank stepped in to stabilize the currency as USD/IDR jumped over 1%. The Indian rupee steadied after a mild rebound from near-record lows.
Dollar Weakens on Fed Cut Bets
The dollar index and dollar futures both slipped 0.1% on Tuesday, extending recent declines and holding at their weakest levels since late July. The fall came after U.S. nonfarm payrolls data showed almost no job growth in August, reinforcing expectations of Fed easing.
Markets are pricing in a 90.1% chance of a 25 basis point rate cut at the Fed’s September 16–17 meeting, with a smaller 9.9% probability of a larger 50 bps cut, according to CME FedWatch.
Before then, investors are awaiting U.S. consumer and producer inflation data for August. With many of President Donald Trump’s tariffs taking effect last month, markets will be watching closely for signs of rising price pressures.
