Most Asian currencies were subdued on Monday as investors turned cautious amid renewed U.S.-China trade tensions, while the yen weakened amid political uncertainty in Japan.
Most Asian currencies were subdued on Monday as investors turned cautious amid renewed U.S.-China trade tensions, while the yen weakened amid political uncertainty in Japan.
The US Dollar Index, which measures the greenback against a basket of major currencies, edged 0.1% lower on Monday after weekly gains. US Dollar Index Futures were largely unchanged as of 05:14 GMT.
Trump ramps up US-China trade tensions
U.S. President Donald Trump reignited trade fears on Friday by threatening duties of up to 100% on U.S.-bound Chinese goods and fresh export controls on critical technology.
However, Trump softened his tone over the weekend, saying markets should “not worry about China” and signalling that Washington did not intend to escalate hostilities imminently. The shift helped steady sentiment, though traders remained wary of unpredictable policy moves.
"We are not convinced that this trade escalation between US and China is over from this morning’s social media tweet from Trump, given the huge gulf of expectations between both US and China," MUFG analysts said in a note.
"As such, we think markets could remain volatile in the near-term, and in the broader context of assets priced quite closely for perfection, we think both realised and implied vol across assets could start to pickup somewhat from reasonably low levels currently," they added.
In other news, data on Monday showed that China’s exports and imports beat forecasts despite headwinds from mounting global tensions and weakening domestic demand.
Still, the Chinese yuan’s onshore USD/CNY pair was largely muted on Monday.
Yen slides as Japan coalition split clouds Takaichi bid
The Japanese yen led losses among major Asian currencies, with the USD/JPY pair rising 0.5% to 151.90 yen.
The currency came under pressure after the junior Komeito party exited the governing coalition, casting doubt on whether ruling party candidate Sanae Takaichi can secure enough parliamentary support to become prime minister.
The political shake-up has fuelled concerns about policy continuity and fiscal direction. Takaichi has advocated for aggressive fiscal stimulus, and investors see heightened uncertainty as a reason for the Bank of Japan to maintain its ultra-loose stance for longer.
Elsewhere, the Singapore dollar’s USD/SGD and the South Korean won’s USD/KRW pair traded flat.
The Australian dollar’s AUD/USD pair rose 0.7%, supported by its status as a high-yielding “antipodean” currency often used as a proxy for global risk sentiment.
The Indian rupee’s USD/INR pair was largely unchanged on Monday.