Asian Currencies Rise as Chinese Data Improves, Dollar Slips on Rate Cut Bets

Most Asian currencies advanced on Monday, supported by signs of stabilization in Chinese business activity and renewed weakness in the U.S. dollar. The greenback extended losses as speculation over near-term Federal Reserve rate cuts intensified and fiscal concerns resurfaced.

Dollar Pressured by Fed Rate Cut Bets, U.S. Fiscal Policy

The U.S. dollar continued to retreat, touching its lowest level in over three years, amid mounting pressure from:

• Expectations of Fed rate cuts as early as the July meeting

• Fiscal uncertainty, with the U.S. Senate advancing a sweeping tax and spending cut bill that may significantly widen the federal deficit

The U.S. Dollar Index (DXY) fell 0.2% in Asian trading hours, adding to last week's losses.

Yuan Strengthens on PMI Data and Trade Optimism

The Chinese yuan appreciated, with the USDCNY pair down 0.1%, bringing the currency to its strongest level since November.

• China's June PMIs showed a smaller-than-expected contraction in the manufacturing sector, while services activity improved.

• Overseas orders recovered, reflecting positive sentiment following the U.S.-China tariff rollback agreement finalized in May.

Despite the improvement, the manufacturing PMI remained below 50 for a third straight month, signaling persistent domestic demand weakness and ongoing pressure from residual U.S. tariffs.

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Broader Asian FX Market Snapshot

• Japanese yen (USDJPY): Little changed, tracking sideways amid mixed risk cues

• South Korean won (USDKRW): Strengthened 0.3%, supported by risk-on sentiment and regional equity inflows

• Indian rupee (USDINR): Traded flat, consolidating after recent strength

• Singapore dollar (USDSGD): Stable, reflecting overall market caution

Most Asian currencies are on track to post monthly gains for June, driven by persistent dollar weakness and increasing demand for regional assets amid easing geopolitical risks.

Outlook: Focus on Fed and Beijing Stimulus

Investors will closely watch:

• The outcome of the U.S. Senate vote on President Trump's tax and spending bill

• Federal Reserve communication, especially around inflation expectations and policy path

• China's next steps, particularly any targeted stimulus measures aimed at reviving domestic demand

A combination of U.S. fiscal expansion and Chinese policy support could create a favorable backdrop for Asian currencies in the near term.