Asian currencies faced downward pressure on Tuesday as the dollar showed signs of strength ahead of Federal Reserve Chair Jerome Powell’s testimony. This came amidst ongoing concerns over new European import tariffs on China, raising fears of potential retaliatory measures and a looming trade war. The dollar index and dollar index futures saw slight gains in Asian trade after recent losses, as market participants awaited Powell’s testimony for further insights on potential interest rate cuts.
The yen continued to struggle against its Asian counterparts, with the USDJPY pair inching higher on Tuesday. Weak Japanese economic indicators raised doubts about the Bank of Japan’s ability to raise interest rates further, keeping traders bearish on the currency. Despite some positive signs in average cash earnings, overall economic readings painted a picture of ongoing weakness in Japan. Government warnings on potential intervention in the currency market failed to change market sentiment.
The Chinese yuan also faced downward pressure, with the USDCNY pair nearing a seven-month high. The escalating trade tensions between the West and China, highlighted by the EU’s tariffs on Chinese electric vehicle imports, contributed to the yuan’s lackluster performance. Market participants awaited China’s response and monitored upcoming economic data for further insights. Concerns about a Chinese economic rebound added to the yuan’s woes, following a series of disappointing data releases in June.
Across the board, Asian currencies remained relatively flat with limited movements. The Australian dollar, South Korean won, Singapore dollar, and Indian rupee all showed minimal changes. Economic data indicating a further deterioration in consumer sentiment in Australia and record highs for the Indian rupee against the US dollar added to the overall uncertainty in the region. Market participants were cautious amid the prevailing trade tensions and awaited key economic indicators for clearer signals on the region’s economic outlook.
Asian currencies faced a mix of challenges including trade uncertainties, weak economic data, and the looming possibility of interest rate cuts. Market participants remained cautious and awaited further cues from central bank officials and upcoming economic releases for clarity on the region’s economic trajectory.