Most Asian currencies advanced on Thursday after the U.S. dollar eased a touch from its recent highs, giving regional units the chance to regain ground lost during the dollar's rally. Still, the greenback remained close to a seven-month peak as markets priced in the potential for further Federal Reserve tightening.
Market backdrop
The U.S. Dollar Index fell about 0.1% to 101.48 after reaching its highest level since November in the prior session. Traders trimmed some dollar positions to lock in profits from the recent rally but largely avoided initiating new directional bets ahead of Thursday's U.S. Personal Consumption Expenditures inflation report - the Fed’s preferred inflation gauge - which is widely expected to provide fresh information on the likely path of U.S. interest rates.
Regional currency moves
The Indian rupee and Malaysian ringgit were among the top regional performers. The rupee rose 0.4% and the ringgit gained 0.5%, helped in part by policy steps from Bank Negara Malaysia this week aimed at encouraging foreign capital inflows and the repatriation of overseas earnings.
China’s yuan recovered modestly, with both onshore and offshore dollar-yuan rates easing by around 0.1%. A softer dollar also supported gains in other emerging Asian currencies: the Philippine peso, Indonesian rupiah and Thai baht each advanced in a range of roughly 0.1% to 0.4%.
The dollar-yen cross was little changed, remaining near multi-decade lows as market participants continued to watch closely for any signs of official intervention. South Korea’s won rose 0.2% following a sharp rally in domestic equities, while the Taiwan dollar gained 0.3%.
Australia: jobs surprise, muted policy read-through
The Australian dollar traded around $0.69 after data showed payrolls increased by 40,300 jobs in May, the largest monthly rise in five months, and the unemployment rate unexpectedly fell to 4.4%. The report pointed to a resilient labor market.
Despite the upbeat labour-market figures, the data did little to change market expectations for the Reserve Bank of Australia’s policy outlook. Analysis from Capital Economics, cited in market discussion, indicated the employment update was unlikely to resolve debate over the RBA’s next move. Persistent underlying inflation was noted as a factor that could still support the case for one final "insurance" rate hike from policymakers.
New Zealand’s dollar steadied as well after earlier weakness pushed it to a seven-month low this week. Both Antipodean currencies remained sensitive to shifts in U.S. interest-rate expectations.
What investors are watching
Traders continue to monitor developments in U.S.-Iran negotiations for any near-term risk implications and are focused on Friday’s U.S. inflation report for guidance on whether U.S. inflation readings will keep interest rates higher for longer. Those factors are expected to shape sentiment toward the dollar and broader currency markets in the near term.
Overall, Asian FX showed modest recovery on a day when the dollar paused after a run-up. Market participants largely remained cautious ahead of key U.S. data releases and sensitive to central bank policy signals across the region.