Dollar Rebounds While Asian Currencies Slide Amid Fed Concerns and Weak Jobs Data
- admin cys
- Jul 24
- 3 min read
A Report by CYS Global Remit Counterparty Sales & Alliance Unit
Fed Uncertainty and Trump’s Comments Spark Market Volatility
Asian currencies generally declined on Thursday as the U.S. dollar recovered from a volatile session sparked by political tensions surrounding the Federal Reserve’s independence. The rebound followed remarks from President Donald Trump, who clarified that he has no plans to remove Fed Chair Jerome Powell but continued to criticize Powell’s cautious approach to interest rate cuts.
The U.S. Dollar Index (DXY), which measures the dollar against six major currencies, rose 0.3% in early trading after losing 0.3% the previous day. Markets had initially reacted to speculation that Powell might be dismissed, causing a sharp decline in the dollar and equity markets, and steepening the U.S. yield curve. Analysts at ING described Wednesday as a “mini-versions” of a potential full-scale market reaction should such a dismissal occur—an unlikely but significant geopolitical risk capable of disrupting currency and bond markets.
Adding support to the dollar was a steady U.S. Producer Price Index (PPI) for June, which alleviated inflation worries after recent high consumer price data, balancing market sentiment.
Asian Currencies Under Pressure from U.S. Politics and Domestic Weakness
Most Asian currencies weakened as temporary relief from the dollar’s earlier slide faded. The Japanese yen was among the hardest hit, with USD/JPY climbing 0.5% to 148.64 amid domestic political uncertainty. Recent polls indicate Prime Minister Shigeru Ishiba’s ruling coalition may lose its majority in upcoming upper house elections, shaking investor confidence.
The South Korean won also declined, with USD/KRW rising 0.4%, while the Singapore dollar (USD/SGD) gained 0.3%. The Chinese yuan remained relatively stable, with both USD/CNY and USD/CNH trading flat—supported by Beijing’s ongoing policy measures and limited impact from political developments.
Other currencies experiencing declines included Indonesia’s rupiah, which fell 0.6%, and the Philippine peso, down 0.5%. The Indian rupee, however, remained unchanged.
Australian and UK Labour Data Fuel Currency Weakness
The Australian dollar led losses among major currencies after disappointing June employment figures. AUD/USD slid as much as 1% to a three-week low, driven by a rise in the unemployment rate and weaker-than-expected job creation. These data have heightened expectations that the Reserve Bank of Australia (RBA) might consider cutting interest rates sooner, especially as inflation pressures ease and trade tensions persist.
“The weaker labour market provides the RBA with more room to ease monetary policy to support growth,” said market analysts. Heightened trade risks and slowing domestic growth bolster the case for a policy shift.
In the UK, the pound edged lower, with GBP/USD dropping 0.3% to 1.3390. UK employment data showed the unemployment rate rising to 4.7%—its highest since June 2021—and wage growth excluding bonuses slowing to an annual 5.0%. These factors give the Bank of England increased flexibility to consider rate cuts at its upcoming meeting.
The euro also fell, with EUR/USD declining 0.4% to 1.1699 ahead of eurozone’s final June CPI reading, which is expected to confirm inflation at 2.0%. While the European Central Bank (ECB) signals a hold in rates, the possibility of Trump’s proposed 30% tariff on EU imports introduces added uncertainty into the region’s economic outlook.
Outlook: Market Vigilance Remains High
Markets remain highly sensitive to political signals, particularly from the U.S., as concerns over central bank independence persist. Although Trump denied plans to dismiss Powell imminently, his ongoing criticisms underscore how fragile investor confidence can be when government influence on monetary policy is perceived to be threatened.
Meanwhile, weak labour markets in Australia and the UK reinforce expectations of monetary easing, contrasting the policy paths of different regions. The dollar may continue to strengthen if the U.S. maintains stable economic fundamentals and a hawkish stance compared to other major economies.
Asian currencies are likely to stay under pressure in the near term, amid renewed concerns over global trade tensions and domestic political developments, with key elections in Japan and economic indicators from China closely monitored
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