Most Asian currencies strengthened on Monday led by a jump in the South Korean won as the U.S. dollar retreated following weaker-than-expected economic data, while attention turned to the Bank of Korea’s interest rate decision later this week.
The US Dollar Index, which measures the greenback against a basket of major currencies, declined 0.4% to 106.18 in Asian trading.
US Dollar Index Futures were also 0.4% lower as of 04:56 GMT.
Asia FX gets respite from dollar weakness
Most Asian currencies saw gains on Monday, buoyed by a weakening U.S. dollar after a survey revealed that U.S. business activity nearly stalled in February, reaching a 17-month low, amid mounting concerns over import tariffs and significant federal spending cuts.
Additionally, the University of Michigan's consumer sentiment index was sharply revised downward to 64.7 in February from a preliminary 67.8, marking the lowest level in 15 months.
Regional currencies have been under considerable pressure due to the Trump administration's tariff threats and the anticipation of prolonged elevated U.S. interest rates driven by persistent inflation.
However, the recent softening in U.S. economic data has led to a decline in the dollar's value, offering a respite to Asian currencies
The Chinese yuan’s offshore pair USD/CNH slipped 0.3%.
The Australian dollar’s AUD/USD pair climbed 0.4%.
The Singapore dollar’s USD/SGD declined 0.3%, while the Indian rupee’s USD/INR pair edged up 0.1%.
The Japanese yen's USD/JPY pair edged 0.1% lower, while the Malaysian ringgit's USD/MYR fell 0.4%.
Bank of Korea expected to cut rates this week
The South Korean won's USD/KRW pair climbed the most among regional currencies against the U.S. dollar, with the USD/KRW pair dropping 0.6%
The Bank of Korea (BoK) is scheduled to announce its interest rate decision on Tuesday amid a backdrop of economic challenges and political instability.
Analysts widely anticipate a 25 basis point reduction, lowering the policy rate from 3.00% to 2.75%, to stimulate the sluggish economy.
South Korea's economic growth has been tepid, with the fourth quarter of 2024 recording a mere 0.1% expansion from the previous quarter.
The nation's political landscape has been turbulent following the impeachment and arrest of President Yoon Suk-Yeol in December 2024. This upheaval has eroded consumer and business confidence, further dampening economic prospects.
In January 2025, the BoK unexpectedly maintained the interest rate at 3.00%, aiming to support the won, which had been weakening partly due to political uncertainties.
Source: Investing