Asian currencies advanced on Thursday as the U.S. dollar extended its slide, pressured by softer inflation data, growing expectations of Federal Reserve rate cuts, and hopes for renewed talks between Washington and Tehran ahead of a ceasefire deadline next week.
Dollar eases to six-week low
The dollar index and its futures slipped about 0.1%, marking a ninth consecutive session of losses and touching their weakest level in six weeks, hovering near the 98.00 mark.
Fresh U.S. data showed producer prices are rising more slowly than feared. The Producer Price Index for final demand climbed 0.5% in March, while the core gauge logged its smallest monthly gain since last summer, reinforcing the view that inflationary pressures may be moderating.
Those figures bolstered expectations that the Federal Reserve will keep its benchmark rate unchanged at 3.5% to 3.75% at its April 28–29 meeting, which would be a third straight pause. A steady Fed stance, as other central banks consider or pursue tighter policy, has reduced support for the greenback and improved sentiment toward currencies and assets linked to lower borrowing costs.
Geopolitics reduce safe-haven demand for dollar
The dollar’s appeal as a safe-haven asset also eased as geopolitical tensions showed signs of stabilizing. Indirect talks between the United States and Iran, mediated by Pakistan, are under way to extend a fragile ceasefire set to expire next week.
No formal deal has been reached, but the White House has signaled optimism about the chances of an agreement. The prospect of reduced conflict risk has further undermined demand for the dollar as a store of value.
Asian FX: broad gains, steady yuan
Most major Asian currencies strengthened against the dollar, with the notable exception of the Chinese yuan, which held steady near multi-year highs.
- The Japanese yen saw the USD/JPY pair edge down 0.2%.
- The South Korean won pushed higher, with USD/KRW dropping 0.3%.
- The Singapore dollar and Indian rupee each gained 0.1% against the greenback.
- The Taiwan dollar advanced around 0.2%.
The yuan’s onshore pair, USD/CNY, was stable around 6.8 per dollar, its strongest level in three years. Despite the lack of further appreciation on the day, China’s currency remained firm after stronger-than-expected economic data.
China growth beats forecasts but momentum cools
China’s first-quarter gross domestic product grew 5% from a year earlier, outpacing forecasts of 4.8%. The expansion was driven largely by a 6.1% rise in industrial output over the quarter and firmer domestic spending, supported by exports and recovering internal demand.
However, the data also flagged emerging softness. Growth appeared to slow toward the end of the quarter, as higher fuel costs and regional trade disruptions weighed on activity. Retail sales in March rose only 1.7%, missing projections and signalling that consumer spending lost momentum as the quarter closed.
Domestic consumption showed some resilience but remains vulnerable to elevated input and energy costs, especially if trade and supply chains face further disruption linked to the Iran conflict.
Australian dollar hits near two-year high
The Australian dollar was among the strongest performers in the region, rising nearly 0.4% to reach its highest level since June 2022, buoyed by improved regional risk sentiment and a still-tight domestic labor market.
March labor data showed slower hiring than in February, but the unemployment rate held at 4.3%, in line with expectations and consistent with a labor market that remains constrained.
The Reserve Bank of Australia, which lifted its benchmark rate by 25 basis points in March to 4.10%, has kept the door open to further moves. Policymakers are monitoring inflation trends closely, with price pressures still shaped in part by energy market volatility tied to Middle East tensions.
For currency traders, the combination of a softer dollar, solid Australian employment figures and a still-hawkish RBA stance has maintained support for the Aussie and reinforced expectations that interest rate differentials could continue to favor the currency in the near term.
Shifting FX trends can ripple into digital assets—see how they intersect with crypto in our guide to TradFi vs DeFi.
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