Asia FX muted as strong US payrolls dent rate cut bets; dollar trims weekly losses

Investing.com-- Most Asian currencies moved in a flat-to-low range on Friday as strong U.S. payrolls data dented bets on U.S. interest rate cuts in the near-term and helped the dollar curb some weekly losses.

The dollar fell slightly in Asian trade after a sweeping tax and spending cut bill backed by President Donald Trump was approved by the House of Representatives, but was sitting on some overnight gains.

Regional markets were also skittish before a July 9 deadline for Trump to impose steep trade tariffs against major economies, with Trump signaling that he could begin notifying countries of his tariff levels by as soon as Friday.

The Japanese yen’s USDJPY pair fell 0.3% after household spending data for May read stronger than expected, pointing to continued inflationary pressures in the country. But the yen clocked steep overnight losses on Thursday. 

The Australian dollar’s AUDUSD pair fell 0.1%, extending Thursday’s losses on soft trade data. Markets are positioning for another interest rate cut by the Reserve Bank of Australia next week.

The Singapore dollar’s USDSGD pair was flat, while the South Korean won’s USDKRW pair rose 0.1%. 

Chinese yuan muted; Beijing flags more US trade progress 

The Chinese yuan’s USDCNY pair showed little reaction to Beijing outlining more stimulus plans, with new measures aimed at boosting the country’s slowing birth rate. 

Signs of improving trade relations with the U.S., after Washington rescinded some chip export controls on China, did little to support the yuan this week, as did mixed purchasing managers index data. 

China signaled on Friday that it was reviewing export licenses for domestic rare earth firms, acknowledging the U.S.’ lifting of its chip export controls. 

The Taiwan dollar hit its strongest level in over three years, with the USDTWD pair falling 0.3% on Friday. Taiwan stands to benefit greatly from trade progress between the U.S. and China, given its heavy exposure to both countries.

The U.S.’ loosening of chip export controls in particular stands to greatly benefit Taiwan’s semiconductor manufacturers, which are among the largest in the world. 

The Indian rupee’s USDINR pair tread water.

Dollar trims weekly losses as nonfarm payrolls dent rate cut bets

The dollar index and dollar index futures fell 0.1% each in Asian trade, and were down 0.4% for the week.

But the greenback firmed from more-than three-year lows after nonfarm payrolls data for June read stronger than expected on Thursday. 

The print highlighted continued resilience in the U.S. labor market, which in turn gives the Federal Reserve less impetus to cut interest rates soon. 

Bets that the Fed will leave rates unchanged in September rose to a 32% probability from a 11.2% probability last week, CME Fedwatch showed, although markets still saw a 63.8% chance the Fed will cut rates by 25 basis points in September. 

Goldman Sachs analysts also maintained their outlook for a 25 bps cut in September, while forecasting lower Treasury yields in the coming months. 

But markets remained on edge over the implications of Trump’s “big beautiful bill,” which was approved after a marathon session in the House of Representatives on Thursday. 

The bill is forecast to increase government debt by $3.3 trillion in the next decade, raising concerns over long-term U.S. fiscal health. 

Asian markets on edge amid trade tariff jitters

Asian markets were on edge over the U.S.’ plans for trade tariffs, after Trump said he will begin sending letters outlining his planned tariffs to major economies by as soon as Friday.

The president’s comments marked a sharp pivot from his earlier claims that Washington will sign 90 trade deals in 90 days, with Trump acknowledging the complexity of such an endeavor. 

Trump’s “liberation day” tariffs, which outline import levies of between 20% to 50% on major economies, are set to take effect from July 9. So far, the U.S. has only signed trade deals with the UK and Vietnam, and a framework agreement with China.

The tariffs, if imposed in their full scale, stand to disrupt global trade and pressure major export-oriented economies in Asia.