Dollar Struggles Amid US Trade Uncertainty Ahead of Crucial Payrolls Data

Summary

Most Asian currencies moved in a flat-to-low range on Friday due to uncertainty over Washington’s tariff policy, despite a seemingly positive call between U.S. and Chinese leaders.

Regional markets remained largely risk-averse, while the dollar struggled ahead of key nonfarm payrolls data due later in the day, which is expected to read weak for May.

The Indian rupee was little changed after the Reserve Bank of India cut interest rates by a bigger-than-expected margin on Friday. The Chinese yuan took little support from a call between U.S. President Donald Trump and Chinese President Xi Jinping, while the Japanese yen was pressured by more weak spending data. Asian Currencies in Flat-to-Low Range Despite Positive US-China Call

The dollar index and dollar index futures both moved little in Asian trade, remaining near a recent six-week low. The greenback was also down about 0.6% this week.

Focus was squarely on nonfarm payrolls data for May, due later on Friday, for more cues on the U.S. economy. Traders were seen positioning for a soft print, especially following a barrage of weak labor market readings from earlier this week.

Uncertainty over the U.S. economy and Trump’s trade policies was seen impacting U.S. hiring trends in recent months. A cooling labor market is likely to put more pressure on the Federal Reserve to cut interest rates, with Trump also reiterating his call for lower rates. 3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

However, the Fed is still expected to keep rates steady later in June. Despite this, traders are bracing themselves for a potential economic slowdown in the U.S., which could lead to further rate cuts and other monetary policy measures.

The dollar’s struggles on Friday were also reflected in its performance against several Emerging Market (EM) currencies. For example, the Mexican peso was down around 0.5% against the dollar, while the Brazilian real was also under pressure by around 0.3%.

China’s yuan saw some respite from a positive call between Trump and Xi, which helped to ease some of the concerns over the stalled trade talks between Washington and Beijing. The USDCNY pair rose 0.1%, but traders were still holding out for more permanent solutions.

Asian Currencies in Flat-to-Low Range Despite Positive US-China Call

In Japan, the yen’s USDJPY pair rose 0.2% due to growing doubts over whether the Bank of Japan (BOJ) has sufficient headroom to raise interest rates further. Weak household spending data on Friday, coupled with soft overall wage income data on Thursday, sparked concerns over private spending in the coming months.

Weak spending stands to undermine Japanese growth and inflation, which may prompt the BOJ to reconsider its monetary policy measures. A recent survey of economists suggested that the BOJ is likely to hold its current interest rate steady for now. But there are growing doubts about whether this will be enough to alleviate some of the pressures facing Japan’s economy.

The Indian rupee remained flat after the RBI cut rates by 50 bps, which was a bigger-than-expected margin. The central bank also unexpectedly slashed its cash reserve ratio to 3% from 4%, as it moved to bolster local liquidity conditions.

RBI Governor Sanjay Malhotra said that inflation is now expected to undershoot the central bank’s 4% annual target in the current fiscal year. However, he maintained forecasts for annual GDP growth of 6.5%, which suggests resilience in the Indian economy despite global trade and economic ructions.

Australian Dollar Falls Amid Soft Growth Data

The Australian dollar fell around 0.2%, remaining under pressure from a soft gross domestic product reading released earlier this week.

Singapore Dollar Remains Unchanged

The Singapore dollar, on the other hand, remained unchanged in holiday-thinned trade.

The overall trend was for currencies to remain flat and within narrow ranges on Friday due to ongoing uncertainty over Washington’s tariff policy and US-China trade talks. However, investors may be cautious about further developments on these issues.