Asian currencies traded mixed Thursday as the U.S. dollar held a two-month high around 101.09, buoyed by stronger-than-expected American manufacturing data and a weak $70 billion five-year Treasury auction that pushed the five-year yield above 5% for the first time since 2007.
The Japanese yen hovered near recent lows, with the USD/JPY pair slipping 0.2% to 157.94. Markets were still digesting the Bank of Japan’s rate hike last week, which took the policy rate to a 31-year high and sent the 10-year government bond yield to around 3.06%, its highest level in three decades. Japan’s flash manufacturing PMI fell to 54.1 in September from 54.9 in August, while its markets reopened after a holiday.
Fed Governor Michael Barr said a robust economy and growing inflation risks could warrant additional rate increases, reinforcing hawkish sentiment. CME FedWatch pricing implied nearly a 70% chance of an October rate hike, up from roughly 50% a week earlier.
Oil added to the inflation picture. Brent crude settled near $103 a barrel after climbing almost 4% on Wednesday, following Iranian President Masoud Pezeshkian’s pledge that Tehran would not concede to U.S. sanctions or a naval blockade. Iran also stated it would not permit freedom of navigation through the Strait of Hormuz while restrictions remain in place, heightening energy-market concerns.
In South Korea, markets were closed for the Chuseok holiday. The won rose 0.5% to 1,372.1 against the dollar. Indonesia’s rupiah gained 0.6% to 17,903.5 after Bank Indonesia kept its benchmark rate unchanged at 5.75% on Wednesday. The Reserve Bank of India held steady as well, with the rupee down a negligible 0.02% at 95.915.
The Australian dollar traded near $0.70 and the New Zealand dollar at $0.57, while the Singapore dollar rose slightly to 1.2801. In China, the yuan held near a 3½-year high reached earlier in the session, with USD/CNH at 6.72 and USD/CNY at 6.71. The currency’s direction remained tied to anticipation of a meeting between Presidents Donald Trump and Xi Jinping. A trade truce is expected to be extended for another two months, though several issues remain unresolved, including artificial intelligence, rare-earth exports, U.S. aircraft purchases, and agricultural goods.
