Asian Currencies Steady as Dollar Gains; Yen Weakens Ahead of Japan PM Vote
Most Asian currencies traded within narrow ranges on Tuesday, while the U.S. dollar strengthened amid easing U.S.-China trade tensions. Optimism returned to markets as both sides prepared for upcoming trade talks, helping calm fears of a renewed trade war.
Japanese Yen Under Pressure Before PM Vote
The Japanese yen remained weak, extending Monday’s losses. Investors increasingly expect Sanae Takaichi, known for her fiscally dovish stance, to become Japan’s next prime minister. Japan’s parliament is scheduled to vote on the new leader later today.
Earlier, Asian markets had declined over worries about U.S.-China relations, but recent conciliatory remarks from U.S. officials helped stabilize sentiment. This shift supported a mild rebound across Asian forex markets.
Meanwhile, dovish comments from Federal Reserve officials reinforced expectations of a possible interest rate cut in October. However, ongoing uncertainty surrounding the U.S. economy—exacerbated by the government shutdown delaying key data releases—left investors cautious before the next Fed meeting.
The dollar index and dollar futures each rose 0.1% during Asian trading, reflecting stronger demand for safe-haven assets.
Chinese Yuan Steady as More Trade Dialogue Expected
The Chinese yuan (USD/CNY) held steady on Tuesday, supported by a series of stronger midpoint fixes from the People’s Bank of China. Market focus remained on potential new U.S.-China trade discussions, following President Donald Trump’s softer tone toward Beijing.
Trump recently described high tariffs on China as “unsustainable” and confirmed plans to speak with President Xi Jinping within two weeks. He also expressed optimism about reaching a “fair deal” and dismissed risks of a major conflict over Taiwan.
However, not all U.S. officials shared that optimism. U.S. Trade Representative Jamieson Greer accused China of “economic coercion” related to its rare earth export controls.
The yuan also gained support from better-than-expected third-quarter GDP figures, though growth was still at its slowest pace in a year.
Markets Eye Japan’s Leadership Vote
The USD/JPY pair rose 0.2%, as the yen lagged its regional peers. Reports indicated that Takaichi’s Liberal Democratic Party (LDP) had secured enough parliamentary support to form a new ruling coalition.
Japan’s upper and lower houses are expected to vote today, with Takaichi facing minimal resistance to her premiership. Known for her expansionary fiscal outlook, Takaichi is likely to increase government spending and maintain loose fiscal policy.
She is also expected to oppose further interest rate hikes by the Bank of Japan, which will meet later in October. The LDP requires 233 votes in the lower house and 124 in the upper house to secure a majority. Voting begins at 13:30 JST (04:30 GMT).
Other Asian Currencies Mixed
Across the region, Asian currencies moved slightly lower in thin trading. The Australian dollar (AUD/USD) dipped 0.1% despite a major critical minerals agreement between Canberra and Washington.
The South Korean won (USD/KRW) and Taiwan dollar (USD/TWD) each rose 0.2%, while the Singapore dollar (USD/SGD) gained 0.1%. Indian markets were closed for a public holiday.
