Asian currency markets opened the week with the South Korean won under the most pressure as the U.S. dollar edged higher and investors awaited fresh U.S. inflation data for signals on the Federal Reserve's policy path.
The US Dollar Index rose 0.18% to 99.72, staying close to its lowest level since June 2. Market expectations for a September Fed rate increase eased following an unexpectedly weak U.S. payrolls report on Friday, which showed the economy lost jobs in July and included sharp downward revisions to earlier months' payroll gains. Those revisions pushed the implied probability of a September Fed rate move down to roughly 44% from about 67% a week earlier.
Won leads regional declines
The USD/KRW pair climbed 0.54% to 1,415.05 in early trade, leaving the won as the weakest of the major Asian currencies tracked. Rising oil prices added to the pressure on the currency, with Brent crude moving toward $84 a barrel as lingering uncertainty around the reopening of the Strait of Hormuz kept energy supply concerns in focus. Given Korea's heavy dependence on energy imports, the currency is particularly exposed to upward pressure in fuel costs.
Yen gives back intervention gains
The dollar strengthened against the yen as the USD/JPY pair rose 0.30% to 158.27. The yen has reversed much of the advance produced by the recent coordinated U.S.-Japan yen-buying intervention - the first such operation since 1998 - which had pushed the currency as high as around 155 after it had slid to a four-decade low near 164 per dollar.
After a 3.2% gain in July, the yen has fallen about 0.5% against the dollar so far this month. The swing underscores the limits of intervention in the face of wide U.S.-Japan rate differentials, ongoing considerations about Japan's fiscal outlook and geopolitical uncertainty. Market participants also noted that Japan's holiday on Tuesday could foster thinner liquidity and sharper moves in the currency. Separately, the Bank of Japan's July meeting summary indicated growing support among policymakers for faster rate hikes as they monitor mounting inflation risks.
Other regional FX moves and central bank watchers
Risk-sensitive currencies in the region were mixed. The Australian dollar eased 0.14% to $0.7058 as markets looked to the Reserve Bank of Australia's policy decision on Tuesday; the RBA is widely expected to hold its key rate at 4.35%, with investors focused on the bank's forward guidance for clues about the outlook for rates and inflation. The New Zealand dollar dipped 0.2% to $0.5884.
Chinese and Southeast Asian crosses moved modestly. The USD/CNY pair ticked 0.05% higher to 6.7464, while the USD/SGD pair rose 0.13% to 1.2796. The USD/INR gained 0.03% to 95.226, and the USD/THB slipped 0.08% to 33.005.
Looking ahead - U.S. inflation and data flow
Attention in global markets now turns to Wednesday's U.S. Consumer Price Index report, seen as the next major test for the Fed's policy outlook. Core CPI is expected to rise 0.2% month-on-month in July, which would lower the annual core rate to 2.5% from 2.6% in June. Following the CPI print, producer prices due on Thursday and U.S. retail sales on Friday are expected to add further context for the Fed's decision-making.
In short, currencies in Asia are navigating a combination of dollar moves, energy price dynamics and looming central bank decisions, with the South Korean won and the yen drawing particular attention as traders adjust positions ahead of key U.S. economic data.