The Canadian dollar slipped past 1.39 per US dollar, easing from its strongest levels since October of 1.378 seen May 6th, as a combination of underwhelming labour-market signals, shifting central-bank expectations and lingering trade frictions weighed on the loonie. While April's employment report showed a net gain of 7,400 jobs—surpassing forecasts—the unemployment rate rose to 6.9%, its highest since November, underlining vulnerability in tariff-exposed manufacturing. With market odds now pointing to better than even chances of a June rate cut after the BoC’s Financial System Review flagged elevated household debt and leveraged hedge-fund activity in bond auctions. At the same time, the Federal Reserve’s decision to hold rates at 4.25–4.50% and its cautionary stance on persistent inflation and labour-market risks have driven US assets higher. Additionally, President Trump’s announcement of a US–UK trade pact and hints of reduced tariffs on Chinese imports have bolstered the USD.

Canadian Dollar Eases from Multi-Month High

The dollar index edged lower to around 100 on Friday, after two straight sessions of gains, as traders looked ahead to US-China trade talks scheduled for the weekend. President Trump expressed optimism, saying he expects the negotiations to yield tangible progress. Meanwhile, the newly announced US-UK trade deal provided some relief to investors hoping for a de-escalation in global trade tensions. However, the deal appears limited in scope, with few details released so far, and a 10% tariff on imports from the UK remains in place. For the week, the greenback is on track to rise about 0.6%, supported by the Federal Reserve’s decision to leave the fed funds rate unchanged, while signaling no urgency to cut rates and highlighting increased risks to both inflation and unemployment.

Dollar On Track to End the Week Higher

The Japanese yen weakened past 145 per dollar, hovering at a one-month low as the US dollar gained ground amid improving global trade sentiment and fading expectations of imminent US rate cuts. The greenback’s strength was buoyed by US President Donald Trump’s announcement of a preliminary trade deal with the UK, the first since the implementation of broad US tariffs last month. Trump also hinted at more trade agreements and suggested that tariffs on China could be eased, depending on the outcome of high-level trade talks scheduled for this weekend in Switzerland. Further pressuring the yen, US Fed Chair Powell dismissed the idea of a preemptive rate cut, pointing to persistent inflationary risks and concerns about the labor market. On the domestic front, data showed that personal spending in Japan rose more than expected in March, offering a positive signal for consumption. However, a third consecutive monthly decline in real wages cast a shadow over the broader economic outlook.

Japanese Yen Weakens as Dollar Rebounds

The New Zealand dollar fell to around $0.588 on Friday, extending losses for a third consecutive session and reaching its lowest level in over three weeks. The Kiwi came under pressure as the U.S. dollar strengthened following President Donald Trump’s announcement of a trade agreement with the UK, which he described as “the first of many.” Trump also said he expects substantive negotiations between the U.S. and China this weekend. On the domestic front, the currency was further weighed down by expectations of further rate cuts from the Reserve Bank of New Zealand. Data released earlier this week showed an easing in tight labor market conditions and a softening in wage pressures, supporting the central bank’s easing bias and pointing to another 25bps rate cut later this month. Rates are seen bottoming at 3.0% by year-end, with swaps implying an additional three rate cuts for the rest of 2025. For the week, the Kiwi has declined around 1%, marking its second straight weekly loss.

New Zealand Dollar Hits Over 3-Week Low

The Australian dollar fell below $0.64 on Friday, hitting a one-week low as the US dollar strengthened amid improving global trade sentiment and reduced expectations of near-term US rate cuts. The greenback’s rally followed President Donald Trump’s unveiling of a preliminary trade deal with the UK, the first since last month’s sweeping US tariffs. Trump also suggested more deals may follow and signaled a potential easing of tariffs on China, contingent on this weekend’s high-level trade talks in Switzerland. The Aussie also faced headwinds after Federal Reserve Chair Jerome Powell pushed back against the idea of a preemptive rate cut, citing persistent risks to inflation and employment. Domestically, the Australian dollar remains under pressure as markets increasingly price in a 25 basis point rate cut by the Reserve Bank of Australia at its May meeting, amid signs of economic slowing and rising external uncertainties.

Australian Dollar Falls on Greenback Strength

The offshore yuan depreciated past 7.24 per dollar on Friday, marking its fourth consecutive session of losses, primarily dragged down by a stronger US dollar. The greenback strengthened on growing optimism over a trade agreement between the US and the UK, representing the first such deal since the US introduced heavy tariffs in the prior month. Additionally, the yuan remained under pressure amid lingering uncertainty over progress in US-China trade talks, despite President Trump signaling a possible relaxation of tariffs. Meanwhile, in China, the central bank injected CNY 158.6 billion into the banking system through seven-day reverse repos at a reduced rate of 1.4%, as part of broader monetary easing efforts aimed at supporting growth amid rising external headwinds. Investors are now turning their attention to upcoming domestic economic data, including inflation and trade figures, ahead of the possible implementation of US tariffs on Chinese goods.

Offshore Yuan Remains Under Pressure

The US dollar index climbed toward 101 on Friday, poised for its third consecutive weekly gain as improving global trade sentiment and fading expectations of imminent rate cuts supported the greenback. The rally was fueled in part by President Donald Trump’s announcement of a preliminary trade deal with the UK, the first since the US imposed sweeping tariffs last month. Trump also suggested that additional agreements could follow and hinted at a potential easing of tariffs on China, depending on the outcome of upcoming trade talks in Switzerland. On the monetary policy front, Federal Reserve Chair Jerome Powell dismissed the idea of a preemptive rate cut in response to potential economic fallout from tariffs. Powell also warned of elevated risks to both inflation and unemployment, signaling caution before adjusting policy further. The dollar posted its strongest gains this week against the euro, New Zealand dollar, and Australian dollar.

Dollar Set for Third Weekly Rise

The South Korean won extended its recent decline past 1,400 per dollar, marking its third consecutive session of losses to hit a one-week low, pressured by ongoing dollar strength. The greenback gained momentum on optimism over a trade deal between the U.S. and the UK, the first since the U.S. imposed sweeping tariffs last month, though specific details remain unclear and no documents were signed. Meanwhile, President Trump hinted at a potential easing of tariffs on China, but uncertainty surrounding this weekend's trade talks in Switzerland tempered optimism. Domestically, the export-driven won found some support from data showing a 23rd consecutive month of current account surplus in March, on the back of solid exports. The goods account posted an $8.49 billion surplus, with exports climbing 2.2% year-on-year to $59.31 billion.

South Korean Won Pressured by Strong Dollar

EURUSD decreased to a 4-week low of 1.12. Over the past 4 weeks, Euro US Dollar gained 0.12%, and in the last 12 months, it increased 4.1%.

Euro Hits 4-week Low

DXY increased to a 4-week high of 100.77. Over the past 4 weeks, Dollar Index lost 0.11%, and in the last 12 months, it decreased 4.32%.

Dollar Index Hits 4-week High

USDJPY increased to a 4-week high of 145.93. Over the past 4 weeks, US Dollar Japanese Yen lost 1.24%, and in the last 12 months, it decreased 6.12%.

Japanese Yen Hits 4-week Low

The Canadian dollar slipped past 1.39 per US dollar, easing from its strongest levels since October of 1.378 seen May 6th, pressured by a resurgent greenback. The Federal Reserve’s decision to pause at 4.25–4.50%, coupled with its cautionary guidance on persistent inflation and elevated unemployment risks, underpinned the USD. Meanwhile, the Bank of Canada’s Financial System Review drew attention to systemic vulnerabilities stemming from President Trump’s tariff war and the outsized presence of leveraged hedge funds in government bond markets, fueling expectations for further BoC loosening. At the same time, announcements of the US–UK trade agreement lent additional strength to the dollar, while ongoing USMCA compliance concerns kept bilateral tariff risks alive.

Canadian Dollar Pressured by USD Strength

The British pound steadied near $1.33 after President Trump announced a US-UK trade deal. While it preserved the 10% tariffs on British goods imposed earlier, it included US procurement opportunities and delayed decisions on UK market access for American agriculture and beef, suggesting a limited initial scope for the agreement. Also, the Bank of England cut its key interest rate by 25 basis points, as widely expected but struck a more hawkish tone. The central bank emphasized that a gradual and measured withdrawal of monetary policy support remains appropriate, and that rates will stay restrictive for as long as necessary to ensure inflation risks subside. Contrary to expectations of a unanimous decision, two policymakers voted to keep rates unchanged, reinforcing the Bank’s more cautious stance. As a result, investors slightly scaled back expectations for further rate cuts and currently see about 59bps of rate cuts by the year-end.

Sterling Little Changed on US-UK Trade Deal

The Brazilian real strengthened past 5.7 per USD, nearing the October 2024 high of 5.62 reached on April 29th, as investors digested the latest monetary policy decision amid easing trade disruption concerns. Copom’s 50bps hike to a 14.75% Selic and its signal that this could be the terminal move, preserved one of the world’s most attractive real interest rates, fueling carry-trade inflows. Additionally, a hefty US $8.2 billion trade surplus in April and a 3.1% year-on-year rise in industrial output bolstered Brazil’s external accounts. Meanwhile the Fed’s decision to hold U.S. rates at 4.25–4.50% limited a widening of interest-rate differentials. At the same time, indications of an imminent US–UK trade pact and renewed US–China negotiations in Switzerland have eased tariff-related headwinds for exporters.

Brazilian Real Strengthens After BCB

The Mexican peso strengthened toward 19.50 per U.S. dollar, near its strongest level in over six months, as investors digested the latest price data amid hopes for easing trade tensions. April’s headline inflation accelerated to 3.93%?year-on-year—slightly above forecasts—while core prices rose 0.49%?month-on-month, suggesting Banxico will proceed cautiously with its anticipated 25–50?bps rate cut on May?15 to maintain a yield edge over the Fed’s unchanged 4.25–4.50% range. Meanwhile, preliminary Q1 GDP growth of 0.2% averted a technical recession, reinforcing economic resilience, and news that senior U.S. and Chinese officials will meet in Switzerland this weekend—alongside indications of an imminent U.S.–U.K. trade deal—has eased fears of broader tariff spillovers for Mexico’s export sectors. In addition, the government’s new fiscal support package—targeted cash transfers, expanded subsidies and temporary tax relief for small businesses—provides a further boost to domestic demand.

Mexican Peso Near Six-Month High

The dollar index rose for a third straight session on Thursday, nearing the 100 mark, as optimism over a potential US-UK trade deal boosted investor sentiment. A press conference is expected later today, with the agreement anticipated to be the first of several similar deals. US and Chinese officials are also scheduled to meet in Switzerland this weekend to discuss trade relations. Meanwhile, the Federal Reserve left interest rates unchanged, with Chair Jerome Powell warning of elevated risks to both inflation and unemployment. He also dismissed the idea of a preemptive rate cut in response to potential economic fallout from President Trump’s proposed tariffs. The dollar posted its strongest gains against the yen and Canadian dollar, while weakening against the British pound, which rose after the Bank of England delivered a widely expected rate cut but struck a more hawkish tone than anticipated.

Dollar Gains for 3rd Session

The euro pared earlier losses to stabilize around $1.13 as markets digested a series of monetary policy decisions and awaited key developments in global trade. The U.S. Federal Reserve held interest rates steady, as expected, but cautioned that President Donald Trump’s tariffs could drive up prices, slow economic growth, and increase unemployment if sustained. Meanwhile, the Bank of England cut its base rate by 25 basis points to 4.25%—a two-year low—following a narrowly split vote, as policymakers responded to persistent domestic weakness and mounting global trade tensions. Elsewhere in Europe, central banks in Sweden and Norway left rates unchanged, despite growing concerns over the economic outlook amid escalating trade uncertainty. In related news, Trump announced that a major trade agreement between the U.S. and the UK would be revealed today, while high-level U.S.-China negotiations are set to resume this weekend.

Euro Cuts Losses to Stabilize at $1.13

The British pound rose above $1.33 after the Bank of England cut its key interest rate by 25 basis points, as widely expected but struck a more hawkish tone. The central bank emphasized that a gradual and measured withdrawal of monetary policy support remains appropriate, and that rates will stay restrictive for as long as necessary to ensure inflation risks subside. Contrary to expectations of a unanimous decision, two policymakers voted to keep rates unchanged, reinforcing the Bank’s more cautious stance. As a result, investors slightly scaled back expectations for further rate cuts. Meanwhile, reports suggesting that President Trump would announce a US-UK trade deal later on Thursday also boosted the sterling.

British Pound Strengthens on BoE

The Indian rupee plunged to 85.7 per USD from the six-month high of 85.2 touched on May 5th after escalating tensions with Pakistan drove investors to pivot toward assets outside of India. Indian forces struck Pakistani territory in retaliation to terrorist attacks on Indian Kashmir last month, vowing more retaliation from both sides. This risked the relative safety of Indian assets in the region as their growing economy and relatively stable currency had triggered a sharp influx of funds into domestic capital markets. Still, the rupee remained higher since the start of the year. Sharper outflows were prevented by the recent plunge in oil prices stemming from higher output by OPEC+ nations, which make up most of India's imports. Additionally, growth prospects for India remained robust despite the heightened uncertainty for the global macroeconomic backdrop, as India's wide trade deficits make its economy more resilient to the wave of tariffs by the US compared to major Asian economies.

Indian Rupee Slides on Pakistan Escalation

The US dollar index rebounded past the 100 mark on Thursday, extending traction from the previous session as signs of progress in talks between the US and major trading partners signaled that the White House is keen on not going forward with its reciprocal tariff package. The US and the UK are expected to announce a trade deal later today, potentially serving as a template for future deals with other major economic partners ahead of key talks with China this weekend. In the meantime, the Federal Reserve held interest rates unchanged, but Chair Powell noted heightened risks to both inflation and unemployment. He also rejected the notion of a preemptive rate cut to offset any potential economic fallout from President Trump’s proposed tariffs. Among major currencies in the basket, the dollar underperformed against the SEK after the Riksbank held rates, while the BoE is set to deliver a rate cut.

US Dollar Rebounds on Potential Trade Deal

The euro dipped slightly below $1.13 as investors remained on the sidelines following a wave of monetary policy decisions and ahead of key developments in global trade policy. The U.S. Federal Reserve held interest rates steady, as expected, while cautioning that President Donald Trump’s tariffs could drive up prices, dampen economic growth, and increase unemployment if sustained. Similarly, central banks in Sweden and Norway opted to keep borrowing costs unchanged, despite mounting concerns over the economic outlook amid escalating trade tensions. Meanwhile, the Bank of England is expected to cut its base rate by 25 basis points—its fourth consecutive reduction—in response to both the global trade war and persistent domestic economic weakness. In related news, Trump claimed a major trade agreement would be announced today, while high-level U.S.-China trade talks are set to resume this weekend.

Euro Eases as Traders Digest Central Bank Policy Moves

The British pound briefly jumped 0.5% to $1.3356 after reports suggested that President Trump would announce a US-UK trade deal later on Thursday. The pound initially rallied on the news, which followed a social media tease from Trump hinting at a “major trade deal,” later linked to the UK. The move also reflected broader dollar weakness, which has dominated currency markets since Trump’s April 2 tariff wave sparked concerns over a potential US recession and persistent inflation. Meanwhile, the Sterling gave up gains to change hands at $1.327 as investors are now focused on the Bank of England’s upcoming interest rate decision. A 25 basis point cut is widely expected, but markets will be watching closely for any guidance on further easing in the months ahead—especially in light of optimism surrounding the trade agreement with the US.

Sterling Up on Trade Prospects, But Softens Pre-BoE

The Japanese yen strengthened to around 143.6 per dollar on Thursday, recouping some losses from the previous session as heightened global trade uncertainty lifted demand for safe-haven assets. Investors reacted to President Donald Trump’s announcement on Truth Social that a news conference would be held Thursday to unveil a deal with a “big” country, reportedly the United Kingdom. Meanwhile, Trump stated that he would not lower tariffs on China as a precondition to begin trade negotiations, just days ahead of planned US-China talks in Switzerland. Markets also monitored developments in US-Japan trade talks, with Tokyo aiming to finalize a bilateral agreement by June. Domestically, minutes from the Bank of Japan’s latest meeting showed policymakers are prepared to continue raising interest rates if the economic and inflation outlooks are met. However, some members voiced concerns over rising external risks, particularly from US trade policy.

Japanese Yen Firms Amid Trade Uncertainty

The Australian dollar climbed above $0.645 on Thursday, recovering roughly half of the previous session’s losses as optimism surrounding global trade developments lifted sentiment. Support for the Aussie came after President Donald Trump posted on Truth Social that he would hold a press conference Thursday to announce a deal with a “big” country, reportedly the United Kingdom. Additionally, top U.S. officials are scheduled to meet their Chinese counterparts in Switzerland this weekend in a fresh bid to ease trade tensions. Still, Trump maintained that he would not reduce tariffs on China as a condition to begin formal negotiations. Elsewhere, the Federal Reserve kept rates unchanged and signaled a cautious stance, highlighting uncertainty linked to tariffs. On the domestic front, markets are increasingly pricing in a 25 basis point rate cut by the Reserve Bank of Australia at its May meeting, as signs of a slowing economy and growing external headwinds weigh on the outlook.

Australian Dollar Rebounds on Global Trade Optimism

The New Zealand dollar rose to around $0.596 on Thursday, after shedding 1.1% in the previous session. The rebound was supported by the prospect of a de-escalation in trade tensions between the U.S. and China, as top officials from both countries will meet in Switzerland on Saturday to kickstart stalled trade talks. Additional support came from China—New Zealand’s top trading partner—where authorities ramped up efforts to stimulate growth amid trade worries. The Kiwi also benefited from a weaker U.S. dollar after the Federal Reserve held rates steady but warned of rising economic risks amid Trump’s chaotic trade war. Domestically, however, expectations of more rate cuts from the Reserve Bank of New Zealand remains a headwind for the currency. Markets imply about a 70% chance that the central bank will cut rates by 25bps later this month, with about three rate cuts anticipated by year-end.

New Zealand Dollar Rebounds

The offshore yuan fell to around 7.23 per dollar on Thursday, marking its third consecutive session of losses, as uncertainty persisted over the trajectory of US-China trade negotiations. On Wednesday, US President Donald Trump claimed that China had requested upcoming high-level talks in Switzerland this week and reiterated that the sweeping 145% tariffs on Chinese goods would remain in place "for now." Recently, China stated that the US had expressed interest in discussions, while also insisting that no negotiations would proceed unless the US first lifted its heavy tariffs. Investor expectations for a breakthrough remain low, as both sides continue to hold firm on key demands, fueling market uncertainty. Meanwhile, on the monetary policy front, the People’s Bank of China announced a 10 bps cut to key lending rates and a 50 bps reduction in the reserve requirement ratio, in a bid to bolster economic growth amid trade war concerns.

Offshore Yuan on 3-Day Losing Streak

The US dollar index fell to around 99.6 on Thursday, reversing gains from the previous session as market participants digested the Federal Reserve’s latest policy stance and looked ahead to high-level trade talks between the US and China. As expected, the Federal Reserve held interest rates steady, but Chair Jerome Powell struck a cautious tone, citing heightened risks to both inflation and unemployment. He also rejected the notion of a preemptive rate cut to offset any potential economic fallout from President Donald Trump’s proposed tariffs. On the trade front, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer are scheduled to meet their Chinese counterparts in Switzerland this weekend to discuss trade issues. However, President Trump stated he would not consider easing tariffs as a prerequisite for beginning talks. The dollar weakened broadly, posting the largest losses against the British pound, Australian dollar, and New Zealand dollar.

Dollar Slips as Traders Eye Fed Signals, US-China Trade Talks

The South Korean won held its recent decline near 1,400 per dollar, as investors remained cautious amid lingering uncertainty surrounding US-China trade talks. Ahead of a scheduled meeting with Chinese officials in Switzerland, President Trump ruled out lowering the steep 145% tariffs on China, dampening hopes for meaningful progress in the negotiations. Adding to market unease, the U.S. Federal Reserve kept interest rates unchanged and signaled a cautious stance, ruling out a preemptive rate cut in response to potential economic fallout from trade tensions. Meanwhile, at home, the government announced plans to execute 70% of the 13.8 trillion-won extra budget within three months to swiftly support the economy and exporters, according to the finance ministry on Thursday. Investors also digested new data showing that South Korea’s foreign exchange reserves fell to $404.4 billion in April, down from $409.7 billion in March.

South Korean Won Holds Decline

USDHKD increased to a 4-week high of 7.76. Over the past 4 weeks, US Dollar Hong Kong Dollar gained 0.04%, and in the last 12 months, it decreased 0.64%.

Hong Kong Dollar Hits 4-week Low

The dollar index initially approached 99.6 but later pared some of its gains, trading below 99.5 on Wednesday as traders digested the latest FOMC decision. The Fed kept the fed funds rate steady as expected but said that uncertainty about the economic outlook has increased further and that the risks of higher unemployment and higher inflation have risen. Traders continue to price in three rate cuts from the Fed this year. Meanwhile, on the trade front, Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are set to meet with their Chinese counterparts this week in Switzerland to discuss economic and trade issues. However, President Trump has stated that he is unwilling to lower tariffs on China preemptively as a means to facilitate deeper trade negotiations with Beijing. The greenback strengthened the most against the Aussie, the ye and the pound.

Dollar Edges Higher as Investors Digest Fed Signals

USDRUB decreased to a 23-month low of 80.19. Over the past 4 weeks, US Dollar Russian Ruble lost 6.33%, and in the last 12 months, it decreased 12.55%.

Russian Ruble Hits 23-month High

The South African rand traded around 18.2 per USD, nearing recent one-month highs, alongside other emerging market currencies amid optimism over a potential easing of US-China trade tensions. Domestically, sentiment was bolstered by Eskom’s pledge of stable winter power supply, while reports indicated President Cyril Ramaphosa will soon launch the second phase of Operation Vulindlela to spur inclusive economic growth. On the monetary policy front, the South African Reserve Bank (SARB) is expected to adopt a cautious stance, likely keeping interest rates unchanged in May amid persistent global uncertainty. Markets anticipate a 25 basis point rate cut in July, followed by another in November.

South African Rand Hovers Around 1-Month High

The Swiss franc edged lower to around 0.825 per USD, pressured by a stronger dollar and growing expectations of further rate cuts by the Swiss National Bank (SNB). Chairman Martin Schlegel recently signaled the central bank is prepared to cut rates—even below zero—and intervene in currency markets to prevent inflation from slipping below its 0%–2% target. With headline CPI flat year-over-year and core inflation easing to 0.6% from 0.9%, deflation risks remain a key concern. This has intensified speculation that the SNB could cut rates again at its June 19 meeting, potentially reentering negative territory.

Swiss Franc Weaker

The Australian dollar slipped back below $0.65 on Wednesday, retreating from five-month highs, weighed down by broader strength in the US dollar following reports that senior US and Chinese officials will meet in Switzerland this week to discuss trade issues. Despite the pullback, the Australian dollar remains underpinned by optimism surrounding a potential US-China trade breakthrough, given Australia’s heavy trade exposure to China. Supporting sentiment further, the People’s Bank of China announced plans to cut key lending rates and reduce banks' reserve requirements to stimulate growth. Domestically, economic data showed continued weakness in Australia’s industrial sector in April, with trade and election-related uncertainties pressuring manufacturing activity. On the monetary policy front, markets expect the Reserve Bank of Australia to cut its benchmark interest rate by 25 basis points to 3.85% at its May meeting.

Australian Dollar Slips as US Dollar Strengthens

The New Zealand dollar eased to around $0.599 on Wednesday, snapping a three-day winning streak, as investors digested mixed signals from domestic labor market data. New Zealand’s unemployment rate held steady at 5.1% in the first quarter, but better than forecasts of 5.3%, while employment rose by 0.1%, matching estimates. However, other details pointed to a weak job market, with wage growth slowing faster than expected. Markets are still pricing in a 25bps rate cut by the Reserve Bank of New Zealand later this month, with about three rate cuts anticipated by year-end. However, losses in the Kiwi dollar may be limited by optimism of a trade deal between the U.S. and China, as the two countries agreed to start negotiations. Senior officials from both sides will meet in Switzerland later this week to kickstart stalled trade talks following President Donald Trump’s sweeping tariff rollout.

Kiwi Dollar Drifts Lower

The Japanese yen weakened past 143 per dollar on Wednesday, snapping a three-day rally, as news of upcoming US-China trade talks in Switzerland eased investor anxiety and reduced demand for safe-haven assets. Sentiment across Asia was further buoyed by the People’s Bank of China’s announcement of rate cuts aimed at bolstering economic growth. Traders also kept a close eye on progress in US-Japan trade negotiations, with Tokyo pushing to finalize a bilateral agreement by June. On the economic front, Japan’s services PMI for April was revised higher, highlighting the strongest increase in new orders in nearly a year. Meanwhile, the Bank of Japan last week held its benchmark interest rate at 0.5% and downgraded both its growth and inflation forecasts—signaling that any future rate hikes remain unlikely for now.

Japanese Yen Weakens on US-China Trade Talks

The offshore yuan fell to around 7.21 per dollar, extending its decline from the previous session after China announced plans for monetary easing measures to support economic growth. The PBoC stated it would lower key lending rates by 10 bps and reduce the reserve requirement ratio by 50 bps, injecting an estimated CNY 1 trillion in liquidity into the market. Meanwhile, renewed optimism emerged as Chinese Vice Premier He Lifeng is scheduled to meet with US Treasury Secretary Bessent and US Trade Representative Greer in an effort to ease trade tensions that have rattled global financial markets and disrupted international trade. Since January, President Trump has imposed tariffs of up to 145% on Chinese imports, prompting retaliatory duties from Beijing of up to 125% on selected American goods. If it proceeds, this meeting would mark the first high-level engagement between the two countries since Chinese Vice President Han Zheng attended President Trump’s inauguration in January.

Offshore Yuan Extends Decline

The South Korean won weakened past 1,390 per dollar, retreating from six-month highs, as the U.S. dollar strengthened on news that the U.S. and China will begin trade talks later this week. The negotiations are scheduled to take place in Switzerland this weekend, where top US officials and Chinese counterparts are set to attend. The U.S. may also announce trade deals with South Korea and other key partners as early as this week, Treasury Secretary Scott Bessent said on Tuesday.  However, South Korean Foreign Minister Cho Tae-yul urged Washington to allow sufficient time for tariff talks ahead of Korea’s June 3 presidential election. Cho’s remarks come as Seoul continues to seek tariff exemptions and a trade agreement before the July 8 deadline, when the 90-day tariff pause ends.

South Korean Won Retreats from Stronger Dollar

The US dollar index climbed above 99.5 on Wednesday, snapping a three-day losing streak following reports that US Treasury Secretary Scott Bessent and trade representative Jamieson Greer would meet with their Chinese counterparts this week in Switzerland to discuss economic and trade matters. This raised optimism about a potential start to trade negotiations to lower hefty tariffs imposed by both countries. Investors also geared up for the upcoming Federal Reserve policy decision,  where it is widely expected to keep interest rates unchanged. Traders will closely monitor Fed Chair Jerome Powell’s comments for insights on the path for rates amid mounting political pressure to ease policy. However, concerns that Trump’s tariffs could push inflation higher clouded the outlook. The dollar strengthened across the board, appreciating the most against the euro, yen, and South Korean won.

Dollar Rises on US-China Trade Talk Optimism

The Australian Dollar exchange rate rose above 0.65 US Dollars in the foreign exchange interbank market.

Australian Dollar traded above 0.65

The Indian rupee strengthened past 85 per USD in May, its strongest level since November of last year, benefitting from a weaker dollar and tracking the rally in Indian assets as the lesser dependence on exports lower the negative impact of aggressive tariffs by the US. The rupee was also supported by limited outflows as higher oil output from OPEC+ nations and growth concerns in the US pressured crude oil and fuel prices, which make up most of Indian imports. The developments were enough to offset the outlook of lower interest rates by the Reserve Bank of India. The latest data showed that the Indian inflation rate fell to its lowest in over five years in March, well below the RBI's mid-point target of 4%. Additionally, the Indian GDP grew by 6.5% in the last financial year from 8.2% in the prior period, forcing the central bank to attend to growth concerns.

Rupee Strengthens to 6-Month High

The euro held steady around $1.13, slightly below the nearly three-year high reached in April, continuing to benefit from broad dollar weakness. Traders remained focused on the ongoing trade war, particularly negotiations between the US and several Asian countries, while talks with China appeared to have stalled. Meanwhile, Friedrich Merz faced an unexpected setback after failing to secure election as German Chancellor in the first round of parliamentary voting. Although the next steps remain uncertain, it potentially delayed Merz’s swearing-in. His CDU-led coalition with the centre-left Social Democrats, along with plans to increase public spending, had been bolstering confidence in Germany’s economic recovery. On the monetary policy front, the European Central Bank is expected to continue cutting interest rates in June, while the Federal Reserve is widely expected to hold rates steady this month.

Euro Little Changed at $1.13

The Japanese yen appreciated toward 143 per dollar on Tuesday, advancing for the third straight session as the dollar remained under pressure from global trade uncertainties. US President Donald Trump said he has no plans to speak with Chinese President Xi Jinping this week, though he signaled a possible reduction in the current 145% tariff rate on Chinese imports—adding nuance to an otherwise tense trade backdrop. Investors are also monitoring the outcome of recent US-Japan bilateral trade negotiations, with Tokyo aiming to finalize an agreement by June. On the monetary policy front, the Bank of Japan held its benchmark interest rate steady at 0.5% last week, as expected. However, the central bank downgraded its growth and inflation forecasts, reinforcing market expectations that any rate hikes remain off the table for now. Trading volumes remained light on Tuesday due to a public holiday in Japan.

Japanese Yen Rises for 3rd Straight Session

The dollar index slipped to around 99.6 on Tuesday, marking its third consecutive daily decline as trade-related uncertainty continued to weigh on investor sentiment. President Donald Trump said he has no plans to speak with Chinese President Xi Jinping this week, though he signaled a potential reduction in the steep 145% tariff rate on Chinese imports. In a further escalation, Trump announced a 100% tariff on foreign-produced films and hinted at upcoming levies on pharmaceuticals within the next two weeks. Market participants are now turning their attention to the Federal Reserve’s policy decision, where it is widely expected to keep interest rates unchanged. Investors will closely watch Chair Jerome Powell’s comments in light of mounting political pressure from Trump to cut rates. Despite the broader weakness, the dollar regained some ground against Asian currencies, particularly the Taiwanese dollar and Malaysian ringgit,  following a bout of selling pressure in recent sessions.

Dollar Remains Under Pressure

The New Zealand dollar rose to around $0.598 on Tuesday, advancing for the third consecutive session, supported by continued softness in the US dollar. The greenback weakened amid uncertainty over trade developments and increased caution ahead of the Federal Reserve’s monetary policy decision. However, gains in the Kiwi were partially capped by disappointing data from China’s services sector, which suggested that US tariffs are beginning to weigh on economic activity. This added pressure to the antipodean currency, given China’s status as New Zealand’s largest trading partner. Attention also turned to the upcoming domestic labor report, which is expected to show a rise in the unemployment rate—potentially reinforcing the case for further monetary easing by the Reserve Bank. Markets have priced in a 75% chance of a 25-basis-point rate cut at the central bank’s meeting later in May, with a total of three additional cuts anticipated this year.

Kiwi Dollar Rises for 3rd Session

The South Korean won slipped to around 1,385 per dollar on Tuesday, ending a two-day rally and pulling back from a six-month high reached in the prior session. The recent surge in the won had been fueled by speculation that the appreciation of Asian currencies was part of a wider initiative to smooth trade negotiations with the US. In the latest developments, the Trump administration indicated it is close to finalizing deals with major trading partners. As one of its major trading partners, particularly in automobiles, ships, semiconductors, and electronics, South Korea's Ministry of Industry officials visited Washington for talks with US Trade Representative counterparts, aiming to make progress toward a potential agreement on US tariffs. However, South Korean officials have emphasized that while the groundwork is being laid, formal negotiations have not yet begun and will likely continue after the presidential election on June 3.

South Korean Won Slips

The Japanese yen weakened toward 144 per dollar on Tuesday, snapping a two-day winning streak as the US dollar regained momentum on hopes for US-China trade talks and investor caution ahead of the Federal Reserve’s policy meeting. Although US President Donald Trump said he has no plans to speak with Chinese President Xi Jinping this week, he signaled a possible reduction in the current 145% tariff rate on Chinese imports—adding nuance to an otherwise tense trade backdrop. Investors are also monitoring the outcome of recent US-Japan bilateral trade negotiations, with Tokyo aiming to finalize an agreement by June. On the monetary policy front, the Bank of Japan held its benchmark interest rate steady at 0.5% last week, as expected. However, the central bank downgraded its growth and inflation forecasts, reinforcing market expectations that any rate hikes remain off the table for now. Trading volumes are expected to be light on Tuesday due to a public holiday in Japan.

Japanese Yen Eases After Two-Day Rise

The New Zealand dollar held around $0.597 on Tuesday, halting a two-day gain, as the US dollar rose and private data indicated weaker Chinese PMI growth. China’s services sector missed forecasts, expanding at its slowest pace since last September, showing signs that US tariffs are taking a toll. This exerted pressure on the Kiwi, given China’s role as New Zealand’s largest trading partner. Meanwhile, attention shifted to upcoming domestic unemployment data, which is expected to show a rise in the jobless rate—potentially strengthening the case for further policy easing by the Reserve Bank. Markets have priced in a 75% chance of a 25-basis-point rate cut at the central bank’s meeting later this month, with a total of three more cuts expected this year.

New Zealand Dollar Halts Gains

The Taiwanese dollar slid past 30 per US dollar on Tuesday, snapping a two-day rally and retreating from a near three-year high reached in the previous session. The recent surge was driven by speculation that the appreciation of Asian currencies, including the Taiwanese dollar and Malaysian ringgit, might be part of broader efforts to accelerate trade deals with the US. However, Taiwan’s central bank denied making any such deal, stating that the US had not asked for a stronger Taiwan dollar, while President Lai Ching-te urged people not to spread false information about alleged currency talks with the US. Taiwan is a major producer of high-end computer chips, with significant exports to both the U.S. and China, making it especially sensitive to shifts in global trade dynamics.

Taiwanese Dollar Retreats After Two-Day Rally

The offshore yuan weakened to around 7.23 per dollar after touching a six-month high in the previous session, as investor sentiment was weighed down by disappointing PMI data, signs that the effects of the ongoing Sino-US tariff standoff were gradually being felt. A private survey on Tuesday showed China’s services activity expanded at its slowest pace in seven months in April, falling to 50.7 from 51.9 in March, as new order growth softened amid uncertainty over US tariffs. Reflecting similar weakness, the Composite PMI dropped to a three-month low of 51.1, though it still marked the 18th consecutive month of private sector expansion. Adding to the pressure, despite earlier optimism, recent trade developments have reignited concerns as Trump announced on Sunday a 100% tariff on overseas-produced movies and plans to impose pharmaceutical tariffs in the coming weeks. A stronger US dollar also pressured the yuan, with the Fed Reserve expected to keep rates steady.

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