Asian currencies weakened broadly on Wednesday as a stronger US dollar pressured regional foreign exchange markets.
The Japanese yen remained close to a four-decade low, keeping traders alert for possible intervention by Japanese authorities.
Meanwhile, uncertainty surrounding Iran-US negotiations and expectations for new Federal Reserve signals continued to support the dollar.
Middle East Uncertainty Supports the Dollar
Market sentiment remained cautious after Iran reportedly declined to meet senior US officials who had traveled to Qatar.
The development suggested that Washington and Tehran were still far from reaching an agreement that would fully reopen the Strait of Hormuz.
The waterway is one of the world’s most important oil shipping routes. Any renewed disruption could increase geopolitical risk and support demand for the US dollar.
Investors Await Federal Reserve Signals
Investors are now focused on remarks from Federal Reserve Chair Kevin Warsh later on Wednesday.
Thursday’s US nonfarm payrolls report will also be closely watched for clues about the strength of the labor market and the outlook for interest rates.
The US dollar index remained firm after delivering its strongest quarterly performance since the third quarter of 2025.
Resilient US economic data and strong investor interest in artificial intelligence-related assets helped the dollar overcome geopolitical uncertainty.
Yen Remains Near a Four-Decade Low
The USD/JPY exchange rate rose to approximately 162.68.
The dollar gained around 2.5% against the yen during the second quarter, marking its fourth consecutive quarterly increase.
The yen remained under pressure despite signs of improvement in Japan’s economy.
The Bank of Japan’s Tankan survey showed stronger confidence among large manufacturers. Meanwhile, the final au Jibun Bank manufacturing PMI remained firmly above the level that separates expansion from contraction.
Japan Intervention Risk Continues to Rise
Bank of America said the yen’s weakness may increasingly reflect currency hedging linked to Japan’s AI-driven stock market rally.
This suggests that the yen’s decline may not be caused only by interest-rate differences or Japan’s balance of payments.
The bank added that the risk of official intervention could rise further if yen selling accelerates.
Japanese authorities have previously entered the currency market to slow rapid and disorderly declines in the yen.
Higher Treasury Yields Boost Dollar Demand
US Treasury yields also remained elevated as traders reduced expectations for aggressive Federal Reserve interest rate cuts.
Higher yields generally make dollar-denominated assets more attractive to global investors.
This helped the US currency strengthen against most major Asian currencies, even where domestic economic data remained positive.
China Factory Data Offers Limited Yuan Support
The onshore and offshore yuan weakened slightly, with both USD/CNY and USD/CNH rising around 0.1%.
The move came despite Chinese manufacturing surveys showing that factory activity remained resilient.
Strong exports continued to support China’s industrial sector, although weaker domestic demand limited the improvement.
Broader dollar strength ultimately had a greater influence on the yuan than the positive manufacturing figures.
South Korean Won Falls Despite Strong Exports
The USD/KRW exchange rate also moved higher, even after South Korea reported strong trade data.
Exports surged in June, while the country’s trade surplus widened sharply.
However, these positive domestic figures were not enough to protect the won from the stronger dollar.
Australian Dollar Weakens After Building Data
The Australian dollar also came under pressure.
USD/AUD rose approximately 0.4% after Australian building approvals unexpectedly declined in May.
The weaker construction data added to concerns about the outlook for parts of the Australian economy.
Regional Currencies Trade Mostly Lower
The Taiwanese dollar weakened as investors continued shifting toward US assets following a strong quarter for AI-related technology stocks.
The Indonesian rupiah also declined, while the Thai baht and Malaysian ringgit moved lower against the dollar.
The Indian rupee was little changed.
Overall, regional exchange rates remained driven more by global dollar demand than by domestic economic releases.
Asian Economic Data Remains Resilient
Economic data across Asia continued to present a relatively stable picture.
Indonesia reported easing inflation pressures while maintaining another trade surplus.
Manufacturing activity also expanded across Thailand, Malaysia, and the Philippines.
India’s factory growth slowed slightly from the previous month but remained firmly in expansion territory.
Despite these encouraging signals, most Asian currencies struggled as investors favored the US dollar.
Asian Currencies Await Payrolls and Iran-US Talks
The next major moves in Asian currencies are likely to depend on Federal Reserve commentary, the US employment report, and developments in Iran-US negotiations.
Any signs that US interest rates may remain high could provide further support for the dollar.
At the same time, renewed tension surrounding the Strait of Hormuz could increase demand for safe-haven assets and place additional pressure on regional currencies.
