Asian Currencies Edge Lower as Dollar Stays Weak on Fed Rate Cut Bets
Most Asian currencies slipped slightly on Thursday, while the U.S. dollar attempted to recover from overnight declines. Market sentiment is increasingly leaning toward a Federal Reserve interest rate cut this month, as signs of cooling in the labor market grow stronger.
Regional currencies gained only limited support from speculation about lower U.S. interest rates. Traders remained cautious, avoiding risk-driven assets due to rising concerns over high global debt levels. Safe-haven assets such as gold continued to benefit from this trend.
Asian currencies also delivered a muted performance throughout the week, as investors waited for more direction on U.S. monetary policy and labor market data.
Dollar Holds Near Key Levels as Payrolls Loom
The dollar index and dollar futures ticked up in Asian trading after recording losses on Wednesday. The greenback remained volatile around the 98 level, driven by speculation over whether the Fed will announce a September rate cut.
Recent JOLTS job openings data highlighted further cooling in the labor market, fueling expectations of a policy shift. Fed Chair Jerome Powell and several officials hinted at the possibility of a September cut to prevent further economic weakness.
According to CME FedWatch, futures markets were pricing in a 97% chance of a 25-basis-point rate cut at the Fed’s September 17–18 meeting. Traders are now awaiting Friday’s nonfarm payrolls report for fresh insight into labor conditions and Fed policy direction.
Soft purchasing managers index (PMI) data released earlier this week also reinforced bets that the central bank may move to cut rates in order to support growth.
Asia FX Flat with Limited Trading Cues
Asian currencies traded in tight ranges on Thursday as markets looked ahead to Friday’s payrolls data for stronger signals.
- Japanese yen (USD/JPY): Up 0.1% amid weak government bond demand. Household spending and wages data due Friday will influence inflation and rate outlook.
- Australian dollar (AUD/USD): Down 0.2% despite July trade surplus hitting a 1.5-year high, driven by stronger exports.
- Chinese yuan (USD/CNY): Flat after positive PMI data, with expectations of further economic support from Beijing.
- Singapore dollar (USD/SGD): Up 0.1%.
- South Korean won (USD/KRW): Up 0.3%.
- Indian rupee (USD/INR): Hovered near record lows as the U.S. imposed 50% tariffs on India over Russian oil purchases. Delhi has indicated it will not comply with the restrictions.
