Asian currencies were set to close the week higher on Friday, with the U.S. dollar near three-month lows, as investors weighed the Federal Reserve's policy path against signs of moderating inflation and regional economic momentum.
The U.S. Dollar Index fell 0.2% to 98.735 by 03:47 GMT, putting it on track for a near 1% weekly decline. The move came despite the U.S. Treasury's announcement on Wednesday that it would double planned buybacks of longer-dated debt to at least $4 billion per operation from $2 billion, beginning in September. The 10-year Treasury yield held around 4.70%, while the 30-year yield remained near 5.25%.
The Japanese yen edged 0.1% higher against the dollar to around 159, with the pair poised for a 0.2% weekly decline. Consumer inflation data released on Friday showed core consumer prices in Japan rose 1.8% year-on-year in July, up from 1.6% in June and matching economists' forecasts. Inflation excluding fresh food and energy accelerated to 1.9% from 1.7%, though it remained below the Bank of Japan's 2% target for a seventh consecutive month. The data reinforced expectations that the BOJ could raise its policy rate from 1% to 1.25% at its September meeting.
Private-sector activity in Japan showed further signs of improvement, with the manufacturing Purchasing Managers' Index rising and new orders expanding at the fastest pace since January 2018.
Among other regional currencies, the South Korean won led losses, with the USD/KRW pair falling 0.9% to its lowest level since September 2025, on track for a 2.5% weekly drop. The Australian dollar gained 0.4% against the greenback, set for a nearly 1% weekly advance. The Chinese yuan traded flat, while the Singapore dollar edged down 0.2%, poised for a 0.7% weekly decline.
The Indian rupee bucked regional weakness, trading flat and set for a 0.3% weekly gain. The currency remained under pressure from rising crude prices and importer hedging, with limited support from Reserve Bank of India intervention.
Oil prices contributed to the dollar's softness, with Brent crude trading just below $94 a barrel after gaining more than 6% over the week. The increase reflected heightened geopolitical risks tied to tensions between the U.S. and Israel amid Iran-related concerns.
