Asian Currencies Rise as Weak Dollar and Trade Concerns Weigh on Markets

Asian currencies gained ground on Thursday, led by a strong rebound in the South Korean won, as the U.S. dollar weakened amid uncertainty over trade negotiations and the Federal Reserve’s interest rate trajectory.

The U.S. Dollar Index dipped 0.2%, extending a week-long slide sparked by soft inflation data and market jitters over U.S. fiscal policy. Analysts at ING noted that while the dollar attempts to recover from April’s sharp drop, concerns over unfunded tax cuts and broader policy risks are likely to limit upside momentum.

The South Korean won outperformed regional peers, with USD/KRW falling 0.8%. The pair had seen wild swings a day earlier, with the won gaining up to 2% before closing flat. Bloomberg reported that South Korean and U.S. officials discussed exchange rate issues during a May 5 meeting, though later clarification revealed that currency policies weren’t part of ongoing global trade talks.

The Taiwanese dollar also strengthened, with USD/TWD down 0.7%. The Japanese yen advanced as USD/JPY dropped 0.5%, ahead of Japan’s Q1 GDP release on Friday. Meanwhile, the Chinese yuan remained stable, with both onshore (USD/CNY) and offshore (USD/CNH) rates showing limited movement.

The Singapore dollar saw mild gains, with USD/SGD slipping 0.2%, while the Indian rupee weakened slightly, with USD/INR rising 0.1%.

In Australia, stronger-than-expected jobs data supported the Aussie dollar. Employment surged by 89,000 in April, reinforcing views of a tight labor market and complicating rate-cut expectations. The AUD/USD pair rose 0.2% ahead of the Reserve Bank of Australia’s rate decision next week, where markets remain divided on the outcome.

Currency markets remain cautious amid shifting global economic signals.