Asian Currencies Weaken as Dollar Firms on Fiscal Concerns and Rate Cut Bets
Most Asian currencies slipped on Wednesday as the U.S. dollar regained ground, supported by expectations of lower interest rates and growing concerns over U.S. fiscal stability.
Traders stayed cautious toward risk-driven Asian markets following a legal challenge to President Donald Trump’s trade tariffs. The case could force Washington to reassess recent trade agreements, adding further uncertainty.
Mixed Performance Across Asia
The Chinese yuan (USD/CNY) edged 0.1% higher after private PMI data showed stronger-than-expected growth in the services sector, adding to earlier signs of resilience in manufacturing.
The Japanese yen (USD/JPY) fell 0.4%, despite PMI data indicating robust growth in both manufacturing and services. Yields on Japan’s 10-year government bonds rose 0.6%.
South Korea’s won (USD/KRW) slipped 0.1% but held up better than peers after stronger-than-expected GDP data for Q2 boosted confidence in the economy.
The Indian rupee (USD/INR) hovered near a record low of 88 per dollar. Traders remained wary of the impact from newly imposed 50% U.S. tariffs, though Indian officials confirmed more bilateral trade talks with Washington were planned.
The Singapore dollar (USD/SGD) weakened 0.1%.
Dollar Index Strengthens
The U.S. dollar index and dollar index futures each rose 0.2%, bringing the greenback back near recent highs. Traders moved into the dollar amid rising global bond yields and mounting concerns over sovereign debt levels worldwide.
President Trump confirmed that his administration will appeal to the Supreme Court after a federal appeals court ruled that most of his tariffs were illegal, with a withdrawal deadline set for October 14.
Markets now await Friday’s U.S. nonfarm payrolls data for further signals on interest rates. CME FedWatch data shows traders pricing in over a 90% chance of a 25-basis-point Fed rate cut later this month.
Australian Dollar Holds Steady on Strong GDP
The Australian dollar (AUD/USD) rose 0.1%, outperforming regional peers after Q2 GDP data came in stronger than expected. Growth was fueled by consumer spending and government outlays, offsetting weaker investment and exports.
Analysts at Capital Economics said the robust print reduces pressure on the Reserve Bank of Australia to deliver more rate cuts, as resilient private demand is likely to keep inflation sticky. August PMI data also pointed to strength in both manufacturing and services.
