Asian Currencies Gain as Dollar Weakens on Trade Optimism and Soft US CPI

Asian currencies rose on Thursday, driven by a weaker U.S. dollar after President Donald Trump adopted a softer tone on trade and affirmed progress with China. The South Korean won and Japanese yen led gains as investor sentiment improved slightly amid easing tensions.

The U.S. Dollar Index slipped 0.3% in Asian trading, hitting its lowest in over six weeks, while futures also fell 0.3%. The decline followed lower-than-expected U.S. consumer inflation data, fueling expectations of potential Federal Reserve interest rate cuts later this year.

Trump stated on Wednesday that a trade framework with China was “done,” pending approval from both him and Chinese President Xi Jinping. The deal allows China to export rare earth minerals and keeps U.S. access open for Chinese students. However, key tariffs will remain — with the U.S. maintaining a 55% average tariff on Chinese imports and China keeping a 10% tariff on U.S. goods. Trump noted he will send “take it or leave it” trade offers to other partners ahead of a July 9 deadline but left the door open for a possible extension.

Currency markets reacted modestly, reflecting caution due to Trump’s previous reversals on tariff decisions. The Korean won surged, with USD/KRW dropping 0.8% on optimism over President Lee Jae-myung’s promise to tackle unfair trade practices. The yen strengthened, with USD/JPY falling 0.4%. The Chinese yuan edged 0.2% higher in both onshore and offshore trading.

Meanwhile, the Singapore dollar and Indian rupee saw little change, while the Australian dollar slipped 0.2% amid muted risk appetite. Analysts warned against assuming trade tensions are fully resolved despite positive developments.

Markets now await further clarity ahead of the Federal Reserve’s policy meeting next week.