Most Asian currencies moved lower on Wednesday as the U.S. dollar traded close to a 13-month high, supported by rising expectations of additional Federal Reserve tightening and ongoing demand for safe-haven assets following a steep selloff in global technology stocks.
The advance of the dollar was visible across the region. USD/KRW rose 0.5% to 1,539.9 despite a rebound in Korean equities, underscoring persistent pressure on regional currencies from higher U.S. yields. The dollar index climbed 0.1% to 101.48, extending gains as markets increasingly priced in more Fed rate hikes.
Market participants are focused on a series of U.S. economic releases this week, including durable goods orders, weekly jobless claims and Friday's Personal Consumption Expenditures price index, which could influence expectations for U.S. policy moves and further impact currency flows.
Yuan and yen remain pressured
China's onshore yuan eased after the People's Bank of China set its daily midpoint weaker for a fourth straight session, a move interpreted by markets as increased tolerance for currency flexibility amid a stronger dollar. USD/CNY rose 0.2%, while the offshore USD/CNH pair also gained 0.2%.
The Japanese yen continued to trade near multi-decade lows, with USD/JPY holding around 161.6. The pair showed limited response to a summary of opinions from the Bank of Japan's June meeting, which indicated some policymakers favoured additional interest-rate increases after the central bank raised rates to 1.0% - the highest level in over three decades. Markets stayed alert to the prospect of official currency intervention by Japanese authorities, particularly given the yen's historically intervention-triggering levels.
Other Asian FX moves and data watches
Elsewhere in the region, TWD/USD weakened 0.1% as investors awaited industrial production data for insight into the island's export and semiconductor sectors. USD/THB climbed 0.6% ahead of the Bank of Thailand's policy decision; economists broadly expected policymakers to hold rates steady, having repeatedly signalled a willingness to look through supply-driven inflation pressures. Recent data showing an easing of inflation in May has reduced immediate pressure for near-term tightening.
The Australian dollar was little changed after data showed underlying inflation accelerated to 3.6% in May, higher than expected and reinforcing arguments for the Reserve Bank of Australia to maintain higher-for-longer interest rates. Malaysia's ringgit weakened as USD/MYR edged higher despite Bank Negara Malaysia unveiling additional measures aimed at encouraging foreign inflows and boosting repatriation of overseas earnings.
Market positioning and outlook
Investors remain positioned for higher U.S. yields and additional Fed tightening, an outlook that is placing upward pressure on dollar-denominated crosses across Asia. The combination of central bank policy signals in Japan, PBOC midpoint adjustments, and domestic data releases across the region is sustaining volatility in currency markets. Market participants are closely watching U.S. economic releases later this week for further directional cues.
Given the current mix of stronger dollar bids and country-specific developments, FX markets in Asia are likely to remain sensitive to both global risk sentiment and local policymaker actions. Currency intervention risk, particularly in Japan, and evolving guidance from the region's central banks are key elements that could alter near-term dynamics.
Reporting note
All movements and figures referenced reflect market action and central bank communications as reported during the session.