Asian Currencies Steady as Dollar Dips Ahead of Key U.S. Inflation Data

Asian currencies held in narrow ranges on Friday following earlier gains sparked by easing Middle East tensions. The Taiwan dollar outperformed, hitting a three-year high, largely due to broad U.S. dollar weakness.

A U.S.-brokered ceasefire between Israel and Iran continued to hold, fueling risk-on sentiment across Asia earlier in the week. However, uncertainty around U.S. economic policy and looming trade tariff deadlines capped further momentum by Friday.

The broader Asian FX market remained cautious ahead of President Donald Trump’s early-July tariff deadline. With no major trade deals finalized, markets fear renewed tariffs on major trading partners. While Trump could extend the deadline, his unpredictable stance kept risk appetite low. U.S. Commerce Secretary Howard Lutnick claimed a trade deal with China had been reached but offered no specific details.

The Japanese yen stayed flat despite softer-than-expected Tokyo inflation data, which cast doubt on the Bank of Japan’s ability to continue rate hikes. The Chinese yuan and Singapore dollar each edged up 0.1%, while the Australian dollar and Indian rupee traded flat. The South Korean won slipped 0.2%.

Meanwhile, the U.S. dollar hovered near its lowest level in over three years amid concerns about Federal Reserve independence. Trump’s repeated criticism of Fed Chair Jerome Powell and his push for immediate rate cuts pressured the greenback, although Powell and Minneapolis Fed President Neel Kashkari signaled no rush to ease policy.

Investor attention now turns to the upcoming U.S. core PCE price index— the Fed’s preferred inflation gauge—expected later in the day. The data is anticipated to show a slight uptick in inflation, potentially influencing the Fed’s next move on interest rates.