Asian foreign exchange markets steadied on Monday after a pullback in the previous session, as investors digested a stronger-than-expected U.S. jobs report and monitored renewed hostilities in the Gulf region that left risk appetite constrained.
The U.S. Dollar Index held near a two-month high during Asian trading hours, following a 0.7% jump on Friday. U.S. Dollar Index futures were trading broadly unchanged during the Asian session.
U.S. payrolls and Fed expectations
Friday's U.S. payrolls release showed the economy added 172,000 jobs in May, a figure that came in comfortably above market expectations and reinforced views that the Federal Reserve may keep monetary policy tighter for longer. As a consequence, markets have repriced the path for policy, with traders placing a higher probability on at least one Fed rate increase later this year, and focusing on the potential timing of a move by December.
Regional currency moves
Across Asia, currency performance was mixed in early trade. The USD/JPY pair was steady at 160.31 yen on Monday, a level the pair first reached at the end of April when Japanese authorities intervened in the foreign exchange market. At the same time, revised Japanese growth numbers showed the economy expanded at a slower pace in the first quarter than initially estimated - revised data put annualized GDP growth at 1.8%, down from the preliminary 2.1% estimate.
The South Korean won saw notable motion: the USD/KRW pair fell 0.8% on Monday after surging to a 17-year high on Friday. Other regional moves included the Australian dollar edging up 0.1% after having slipped to a near two-month low on Friday, the onshore Chinese yuan's USD/CNY rate rising 0.3%, the Singapore dollar's USD/SGD ticking 0.1% higher, and the Indian rupee's USD/INR pair gaining 0.3%.
Geopolitical backdrop
Investor sentiment remained guarded amid a renewed spike in tensions in the Gulf. Regional reports said Iran fired several missiles toward northern Israel late on Sunday, with Israeli air defenses intercepting the projectiles. Tehran framed the attack as a response to Israeli operations in Beirut's southern suburbs. Israel launched retaliatory strikes on Monday, coming even after reports that U.S. President Donald Trump had urged Israel to refrain from further attacks.
The escalation, together with continuing concerns around the Strait of Hormuz, contributed to worries over global energy supplies and heightened inflation risk perceptions. That geopolitical uncertainty helped support demand for the dollar as a safe-haven currency.
Near-term focus
Market participants are now watching closely the upcoming U.S. consumer and producer price readings due later in the week, which could deliver fresh signals on inflation momentum and the Federal Reserve's rate path. These data releases are likely to influence market pricing for policy and could prompt further moves in currency markets depending on the strength or weakness of the readings.