Asian Currencies Steady as Markets Eye U.S. Trade Talks and Fed Rate Path

Asian currencies traded largely flat on Thursday, weighed down by weak economic data from China and Australia, while investor focus remained on U.S. trade developments and upcoming labor data. The Chinese yuan (USDCNY) held steady after June’s services PMI came in softer than expected, though still indicating expansion for a 30th straight month. Markets largely brushed off news that the U.S. had eased certain chip export restrictions to China, a sign of improving Sino-U.S. trade ties following a framework deal.

The Taiwan dollar (USDTWD) slipped 0.3%, underperforming regional peers due to its exposure to U.S. chip controls affecting major Taiwanese chipmakers. Meanwhile, the Australian dollar (AUDUSD) dropped 0.2% after May trade data showed a sharp fall in exports, underscoring global demand concerns. The South Korean won (USDKRW) rose 0.3%, while the Singapore dollar (USDSGD) saw modest gains. The Japanese yen (USDJPY) and Indian rupee (USDINR) were mostly unchanged.

The U.S. dollar index inched up 0.1% but stayed near multi-year lows. Traders await June nonfarm payrolls data, due later Thursday, for insights into the Federal Reserve’s interest rate direction. A weaker labor market could support expectations of rate cuts, especially after former President Donald Trump reiterated calls for lower rates while criticizing Fed Chair Jerome Powell.

Additionally, investors are watching the progress of a major U.S. tax and spending bill in Congress. Concerns over its fiscal impact and rising government debt had pressured the dollar and triggered a recent selloff in U.S. Treasuries.

Markets remain cautious ahead of the July 9 deadline for Trump’s proposed “liberation day” tariffs. While a deal with Vietnam was reached, investors await outcomes of U.S. trade negotiations with larger economies like India and Japan.