Most Asian currencies traded in tight ranges on Tuesday as the second quarter closed, with the Japanese yen slipping to its weakest point in roughly 40 years and prompting renewed intervention worries. At the same time, stronger-than-expected Chinese manufacturing activity helped steady the yuan and lent support to regional FX sentiment.
The USD/JPY pair rose 0.15% to 162.18 after earlier touching 162.41, a level not seen since 1986. The move kept market attention on the possibility of another intervention by authorities after Finance Minister Satsuki Katayama reiterated that officials stood ready to respond to excessive currency volatility, while stopping short of issuing any more forceful warnings.
The yen has been under pressure through the quarter, on track to weaken by roughly 2% in the three months to the end of June. That would mark a fourth straight quarterly decline as Japan's persistently low interest rates leave the currency exposed vis-a-vis a still-high US rate environment, despite intervention earlier in the year.
China's yuan was largely steady after official data showed manufacturing activity unexpectedly returned to expansion in June. Traders found some reassurance in the improving factory performance and broader business conditions in the world's second-largest economy, with the yuan holding near recent levels. The USD/CNY pair was little changed for the quarter.
Regional movers and drivers
- In North Asia, the South Korean won was among the weakest regional performers as USD/KRW climbed 0.5%. Market participants said some of the move reflected profit-taking after a strong quarter for Korean assets, which had been buoyed by AI-related chipmakers.
- Taiwan's dollar was largely unchanged, reflecting subdued trading across the region even as Chinese data improved.
- Indonesia's rupiah remained under pressure, with USD/IDR rising 0.4% amid ongoing foreign capital outflows and concerns around Indonesia's fiscal outlook. The rupiah has been one of the weakest Asian currencies this year amid sustained selling in local equity and bond markets.
Other session moves included AUD/USD slipping 0.2% after minutes from the Reserve Bank of Australia's June meeting reinforced a cautious, data-dependent tone. Policymakers emphasized that inflation risks remained balanced notwithstanding signs of easing price pressures.
Several smaller Asian crosses posted modest losses against the dollar: INR/USD weakened 0.2%, SGD/USD eased 0.1%, and the PHP/USD, MYR/USD and THB/USD also registered small declines.
DBS raised its Singapore 2026 GDP forecast to 4.3% from 2.8%, citing stronger AI-driven exports, easing geopolitical risks and resilient domestic investment as supporting factors for growth expectations.
Dollar dynamics and near-term catalysts
The US Dollar Index rose 0.2% to 101.32 as investors focused on the upcoming US nonfarm payrolls report, due on Thursday. Recent months of stronger-than-expected US job growth have reinforced expectations that the Federal Reserve could keep interest rates elevated for longer, supporting the dollar. The currency is set for a roughly 1.4% gain in the quarter, after climbing 1.6% in the first three months of 2026.
Market participants were also watching developments in diplomacy between the United States and Iran. Officials on both sides signaled negotiations could resume in Doha this week, although Tehran said no formal meeting had been scheduled, leaving risk sentiment cautious.
Regional data and broader picture
Regional economic indicators painted a mixed picture. Japan's industrial production missed expectations, while the Philippines reported inflation within its central bank's target range alongside resilient trade figures. Thailand released its industrial production data, and investors continued to assess India's trade balance for fresh signals on growth prospects in the region.
As the quarter concluded, markets reflected a blend of caution and selective positioning: intervention risk around the yen; the stabilizing impact of better Chinese factory data; and dollar strength ahead of key US labour-market information.
Summary prepared using regional market moves and official comments available at the close of the second quarter.