Asian Currencies Struggle Amid Fed Uncertainty, Strong Dollar

Asian currencies traded mostly flat on Friday but remained on track for weekly losses, pressured by a stronger U.S. dollar and lingering concerns over interest rates and trade tensions. The U.S. Dollar Index slipped 0.2% during Asian hours yet stayed poised for a second consecutive weekly gain, buoyed by hawkish sentiment surrounding the Federal Reserve’s monetary policy.

Investor caution grew after this week’s U.S. consumer price index (CPI) came in slightly above expectations, suggesting that President Donald Trump’s trade tariffs may already be influencing inflation. Several Fed officials emphasized sticky inflation and indicated that tariffs could be feeding into consumer prices, reinforcing a cautious outlook on rate cuts.

Political tension added to market jitters as Trump declined to confirm Fed Chair Jerome Powell’s job security, raising concerns about the central bank’s independence. With the August 1 tariff deadline approaching, investors remained risk-averse.

Across Asia, the Korean won traded flat but was set to gain nearly 1% this week. The Singapore dollar edged down 0.1%, while both the onshore and offshore yuan slipped 0.1%. The Indian rupee also traded steady but was heading for weekly losses. In contrast, the Australian dollar rose 0.4% on Friday, driven by weak domestic jobs data that boosted rate cut expectations from the Reserve Bank of Australia.

The Japanese yen remained subdued, with the USD/JPY pair on track for a 0.7% weekly drop. Focus shifted to Sunday’s upper house elections amid speculation that Prime Minister Shigeru Ishiba’s coalition may lose its majority. Meanwhile, Japan’s core CPI eased in June but stayed above the Bank of Japan’s 2% target, fueling speculation of further rate hikes.

Markets remain sensitive to economic data and policy signals amid ongoing global uncertainty.