Asian currencies buckle as dollar heads for best month since July 2025

The dollar index eased to around 101.2 on Friday after hitting a 13-month high of 101.80 earlier this week, with markets pricing roughly 67% odds of a Fed rate hike in September.reuters+1
China's central bank set the yuan fixing weaker for a fourth straight session — the longest such streak since April 2025 — while South Korea's won breached 1,540 per dollar for the first time in 17 years, according to Bloomberg.bloomberg+1
The Indian rupee and other regional currencies have relied on central bank intervention to limit losses, as upwardly revised U.S. GDP growth of 2.1% reinforced the dollar's strength.bea+1

Several Asian currencies faced broad-based selling pressure on Friday as the U.S. dollar, buoyed by hawkish Federal Reserve expectations and upbeat economic data, remained on track for a weekly gain despite easing slightly in the session.

Dollar Strength Drives Regional Weakness

The dollar index edged lower on Friday to around 101.2 but was poised for a weekly advance, having touched a 13-month high of 101.80 earlier in the week. The greenback has been supported by growing expectations that the Federal Reserve could raise interest rates later this year, with CME FedWatch data showing roughly 67% odds of a September hike. The Bureau of Economic Analysis released its final estimate of first-quarter GDP on Thursday, revising growth up to an annualized rate of 2.1%, above the earlier estimate of 1.6%.foxbusiness+4

China's People's Bank of China set its daily yuan fixing weaker for a fourth consecutive session this week — the longest run of reduced fixings since April 2025, according to Bloomberg — as the USD/CNY pair climbed above 6.80. The Malaysian ringgit has weakened to a six-month low against regional peers, with analysts expecting continued softness amid elevated inflation and persistent U.S. rate differentials.tradingeconomics+3

South Korean Won Triggers Intervention Concerns

The South Korean won breached the 1,540 level against the dollar for the first time in 17 years on Tuesday, closing at 1,541.8. The move prompted verbal intervention from the Ministry of Economy and Finance and the Bank of Korea, which warned they would not tolerate excessive volatility or one-sided movements. The won recovered to around 1,535 on Friday after suspected dollar selling by authorities and currency hedging by the National Pension Service helped ease pressure.tradingeconomics+2

Wider Rate Differentials Weigh on Outlook

The combination of strong U.S. jobs data, persistent inflation, and a tech-sector selloff boosting safe-haven demand has propelled the dollar to its best month since July 2025, with gains of over 2.3%. Across the region, the Indian rupee has also required central bank support through dollar sales by state-owned banks, while the Indonesian rupiah and Philippine peso have posted multi-session declines.reuters+3

Reuters Thomson Reuters Corporation reported that the dollar was poised to end the week higher even as it gave back some gains on Friday, with falling oil prices and slightly tempered rate-hike expectations offering modest relief to battered Asian currencies.reuters

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