Asian Currencies Stabilize as U.S. Dollar Remains Strong Ahead of Key Jobs Data

Asian currencies steadied on Thursday after experiencing significant losses in the previous session, as the U.S. dollar remained close to a two-month high. Investors continued to monitor escalating Middle East tensions and expectations that the Federal Reserve could maintain higher interest rates for a longer period, both of which supported the greenback.

The U.S. Dollar Index held near its strongest level in roughly two months during Asian trading after posting solid gains overnight. Market sentiment improved slightly after Washington announced that Israel and Lebanon had agreed to implement a ceasefire arrangement. However, the deal remains dependent on Hezbollah suspending its military activities, leaving investors cautious about the region’s stability.

Geopolitical concerns continued to influence currency markets. Reports of Iranian missile attacks targeting Kuwait and Bahrain, along with U.S. military strikes on Iran’s Qeshm Island near the Strait of Hormuz, increased uncertainty and boosted demand for safe-haven assets, including the U.S. dollar.

Among regional currencies, the South Korean won recovered modestly, with the USD/KRW pair falling 0.3% after jumping 1.2% in the previous session. The Indian rupee remained stable as the USD/INR pair traded flat following Wednesday’s 0.5% rise. The Australian dollar also showed little movement after declining 0.7% a day earlier. Meanwhile, China’s yuan weakened slightly, with USD/CNY edging up 0.1%, while the Singapore dollar remained largely unchanged against the U.S. currency.

The Japanese yen continued to attract attention as USD/JPY hovered around the critical 160 level. The pair traded near 159.97, keeping traders alert for potential intervention by Japanese authorities. Policymakers recently reiterated warnings against excessive currency volatility, while Bank of Japan Governor Kazuo Ueda suggested further interest rate increases could be considered if inflation risks intensify.

The dollar also benefited from stronger-than-expected U.S. economic indicators. ADP data showed private-sector employers added 122,000 jobs in May, highlighting labor market resilience. Additionally, the ISM Services PMI rose to 54.5, signaling continued economic expansion. A sharp increase in the survey’s prices-paid component reinforced concerns that inflation remains elevated.

Investors are now closely watching Friday’s U.S. nonfarm payrolls report, which could provide critical insights into the Federal Reserve’s future interest rate decisions and set the direction for global currency markets in the coming weeks.