The Brazilian real weakened past 5.55 per USD, approaching early-June lows, as the U.S. dollar staged a modest rebound off recent troughs, underpinned by reports that Washington and Brussels may soon agree to a 15% baseline tariff and by surprisingly resilient U.S. labor-market data. Domestically, Brazil’s inflation accelerated to 5.3%  year-on-year in mid-July, above expectations and effectively ruling out any near-term rate cuts by COPOM. Adding to the pressure, President Lula’s increasingly strident defense of national sovereignty and the prospect of 50% US tariffs on Brazilian exports have heightened policy uncertainty. However, the real’s losses have been contained by Brazil’s still-wide interest-rate differential, COPOM is expected to hold the Selic at a 15% peak, and by renewed foreign-exchange inflows, as global carry-trade investors continue to chase Brazil’s attractive yields.

Brazilian Real Weakens Past 5.55 USD

The Mexican peso steadied around 18.55 per USD, halting its rally that took it to its one-year high of 18.537 reached on July 23rd, as the US dollar staged a partial rebound from its two-week lows, driven by fresh optimism over US–EU trade talks and resilient US jobless-claims data that tempered expectations for imminent Fed easing. However, on the domestic front, mid-month core inflation accelerated to 4.25%, its highest since May?2024, underscoring persistent underlying price pressures and quashing any near-term prospect of a rate cut by Banxico.

Mexican Peso Remains Near 1-Year High

The Russian ruble was at 79 per USD, halting the rally that topped at two-year highs of 76.8 touched earlier in July amid the outlook of lower rates by the CBR. The central bank cut its rate by 200bps to 18% and signaled that another cut may be appropriate this year to stoke growth, as real rates remain among the highest globally. Still, the currency remained 40% higher year-to-date due to capital controls by the Kremlin. Moscow's new mandate has companies selling 40% of proceeds until April 2026, although the Kremlin has stated that firms are selling 70% of their earnings. In the meantime, the slowing Russian economy and sanctions from the West continued to prevent domestic businesses from importing goods and services, pressuring domestic demand for hard currency. Meanwhile, the EU's new sanctions package targeted more Russian banks and shadow tankers that have been transporting Russian energy, while lowering the cap to buy Russian oil at 15% below market price.

Russian Ruble Halts Rally

The British pound fell to $1.347, retreating further from its two-week high of $1.358, as recent UK data shifted focus from inflation to growth concerns. June retail sales rebounded by just 0.9% after a sharp 2.8% drop in May, which was revised even lower. Core sales excluding autos and fuel rose only 0.6%, missing forecasts of a 1.2% gain. The warm weather boosted food sales, but the weak recovery adds to worries over the UK’s economic momentum. Combined with disappointing PMI figures, the data strengthens expectations that the Bank of England will prioritize supporting growth over tackling inflation. Markets are increasingly pricing in a 25 basis point rate cut in August, with a second one expected later in the year. Meanwhile, the US dollar gained on reduced hopes for Fed rate cuts, especially after President Trump said there's no need to fire Fed Chair Jerome Powell. In Europe, a hawkish ECB tone is leading traders to scale back expectations for further rate cuts this year.

Sterling Weakens Further after Retail Sales

The Japanese yen slipped to around 147.5 per dollar on Friday, marking its second consecutive day of losses as markets digested the implications of the new US-Japan trade agreement. The deal imposes a 15% tariff on Japanese exports to the US, significantly lower than the 25% previously threatened by Trump, providing some relief but keeping trade tensions in focus. On the economic front, Tokyo’s core inflation for July came in slightly below expectations but remained well above the BOJ’s 2% target, reinforcing speculation of another rate hike later this year. The BOJ will announce its policy decision next week and is widely expected to keep rates unchanged amid concerns about the economic fallout from US tariffs. However, the central bank is also likely to revise up its inflation forecast in its quarterly outlook. Earlier this week, BOJ's Uchida signaled a cautious stance on further tightening, citing heightened uncertainty over US trade policy and its broader global implications.

Japanese Yen Weakens for Second Day

The New Zealand dollar edged down to $0.602 on Friday but remained poised for a weekly gain, underpinned by improved risk sentiment amid prospects of further US trade deals. Investors are now looking ahead to another round of US-China trade talks next week, aimed at extending the August 12 tariff pause deadline. This comes on the heels of a recent agreement between the US and Japan, as well as a potential deal with the EU. On the domestic front, markets are pricing in about a 75% chance that the Reserve Bank of New Zealand will cut its 3.25% cash rate by 25bps at its August meeting, though investors suspect this will be close to the end of the easing cycle. Meanwhile, RBNZ Chief Economist Paul Conway on Thursday said that the central bank is prepared to cut rates further if price pressures continue to ease as anticipated, warning that US tariffs could weigh on economic growth and inflation. The kiwi was up 1% so far this week, snapping a two-week losing streak.

New Zealand Dollar Heads for Weekly Gain

The South Korean won weakened to around 1,376 per dollar on Friday, snapping a five-session rise, as pressure mounted on Seoul following Japan's recent trade deal with the U.S. Industry Minister Kim Jung-kwan and Trade Minister Yeo Han-koo have been in Washington, with one official describing the ongoing negotiations as entering a “critical final phase.” On the data front, South Korea’s exports fell 2.2% yoy in the first 20 days of July, mainly due to weaker demand from the U.S. and China amid tariff uncertainties. Imports shrank 4.3%, reversing a 3.3% growth in June. Meantime, producer prices rose 0.5% in June, up from May’s three-year low of 0.3%. Adding to pressure on the won, the U.S. dollar index rose to around 97.6 after jobless claims fell for the sixth straight week, defying consensus for a rise. President Trump visited the Fed Thursday, ahead of next week’s policy meeting, where markets largely expect rates to remain unchanged amid inflation concerns tied to trade tensions.

South Korean Won Retreats

The offshore yuan weakened to around 7.15 against the US dollar on Friday, retreating from an over eight-month high reached in the previous session, as investors cautiously awaited next week's high-stakes US-China trade negotiations. Following US Treasury Secretary Scott Bessent's confirmation of the trade talks, he noted that the issue of TikTok could be on the agenda, warning that if Beijing fails to approve a divestment deal involving ByteDance, the platform could soon be banned from operating in the US. Meanwhile, President Trump hinted at the possibility of a visit to China "in the not too distant future," a move that may represent an attempt to stabilize the strained trade relationship between the world’s two largest economies. Looking ahead, investors are bracing for China’s industrial profits report this weekend for signs of how companies are coping with tariff challenges. Despite Friday's loss, the currency is on track for weekly gains.

Offshore Yuan Weakens

The dollar index hovered around 97.5 on Friday but remained on track for a steep weekly loss as traders weighed evolving trade developments and looked ahead to next week’s Federal Reserve policy meeting. Reports indicate that US and EU officials are nearing a trade agreement that would impose a 15% tariff on most EU goods, mirroring a similar deal recently struck with Japan. On the monetary policy front, the Fed is widely expected to leave interest rates unchanged next week as it monitors the inflationary impact of new tariffs. Meanwhile, President Donald Trump softened his stance on Fed Chair Jerome Powell after a historic visit to the central bank’s headquarters, stating he has no plans to remove him. Markets are currently pricing in 43 basis points of rate cuts by the end of 2025, with reductions expected in both September and December.

Dollar Heads for Sharp Weekly Decline

The Australian dollar fell to around $0.658 on Friday, extending losses from the previous session as investors remained cautious ahead of key inflation data due next week. Both monthly and quarterly inflation figures are set to be released, which could play a key role in shaping the Reserve Bank of Australia's monetary policy outlook. RBA Governor Michele Bullock recently emphasized that the central bank is reluctant to cut interest rates until there is stronger evidence that inflation is sustainably returning to its 2.5% target, as she defended the RBA’s slow and steady approach. Meanwhile, investors are closely watching developments in US–Australia trade relations. In the latest development, Australia has agreed to ease restrictions on US beef imports—a decision that follows tensions over previous trade limitations. Despite two sessions of losses, the currency is still on track for significant gains.

Aussie Dollar Extends Fall, Still on Track for Weekly Gain

USDTRY increased to an all-time high of 41.91. Over the past 4 weeks, US Dollar Turkish Lira gained 1.9%, and in the last 12 months, it increased 22.19%.

Turkish Lira Hits All-time Low

The Canadian dollar traded around?1.36 per US dollar after recovering sharply from its July?17th low of?1.374, lifted by a softer US dollar following renewed optimism that US–Japan and US–EU trade agreements would avert an escalation of tariffs. Crude prices also firmed, reinforcing Canada’s oil-export revenues and lending additional support to the loonie. ?However, that rebound has stalled as markets refocus on the looming August?1st tariff deadline, where stalled US–Canada negotiations and Prime Minister Carney’s insistence on “no bad deal” have raised the specter of punitive levies. ?At the same time, stronger June retail sales likely underpin domestic growth expectations and lift pressure on the BoC to extend its loosening cycle.

Canadian Dollar Halts Rebound

The US Dollar Index rebounded to 97.5 on Thursday, reversing earlier losses after fresh data underscored continued strength in the labor market despite lingering trade tensions. Initial jobless claims fell for the sixth straight week, dropping to 217,000 from 221,000 and defying expectations for a rise to 227,000. On the trade front, reports suggested that the US and EU are edging closer to a deal, with talks focused on implementing a baseline 15% tariff on EU goods. Meanwhile, Treasury Secretary Scott Bessent indicated that the current tariff truce with China is likely to be extended beyond its August 12 deadline. In terms of monetary policy, the Fed is expected to remain cautious on further rate cuts, as concerns grow that tariffs could fuel inflation. Adding to the tension, President Trump — a vocal critic of Fed Chair Powell — is set to make a visit to the central bank, a surprise move likely to further strain relations between the Fed and the administration.

Dollar Rebounds on Strong Labor Data

The euro traded at $1.175, slightly below its highest level since August 2021, after the ECB held interest rates steady amid heightened uncertainty, especially over EU-US trade talks ahead of the August 1 deadline. The central bank has already cut rates four times this year, lowering the deposit rate from the 4% peak in 2024 to 2% in June. Despite Eurozone inflation hitting the ECB’s 2% target last month, policymakers paused in July due to geopolitical tensions. The EU’s trade relationship with the US, its largest partner, remains at risk, with negotiations ongoing and potential tariffs of up to 30% looming. The base-case scenario includes a 15% US tariff on EU goods, with possible EU countermeasures in development. EU diplomats expressed skepticism about a near-term breakthrough, stating the final call lies with President Trump. The uncertainty is weighing on sentiment, even as both sides explore limited exemptions and tariff reductions as part of a possible deal.

Euro Weakens Slightly

The Turkish lira maintained its gradual weakening trend to a record low of 40.5 per USD in late July as the central bank continued to gauge appropriate controls to guide its desired lira path. The monetary authority raised the withholding tax on short-term lira deposits by 2.5 percentage points to support the government's budget revenues and curb dollarization. The move was the latest implementation of capital controls, in addition to FX-protected deposits, that the government and central bank coordinated as a release valve for the lira as policymaker normalize their economic backdrop. Still, softer inflation allowed the TCMB to deliver a 300bps rate cut in July, more than median market expectations of a 250bps cut, to trim real interest rates that previously stood at over 10%, among the largest in the world.

TCMB Maintains Gradual Lira Weakening

The British pound slipped to $1.354 from a two-week high of $1.358 after weaker-than-expected UK PMI data raised concerns about the economy and boosted bets on Bank of England rate cuts. Services and composite readings missed forecasts, signaling a sharper slowdown in private sector growth, while manufacturing showed a smaller-than-expected contraction. Despite a slight rebound in input price inflation, analysts expect the BoE to prioritize growth over inflation due to soft data and a looser labor market. Traders now await retail sales data, expected to rebound thanks to warm weather. Meanwhile, broader market sentiment was lifted by signs of progress on a US-EU trade deal. Reports suggest a 15% tariff agreement is taking shape, with the EU aiming to include autos. President Trump said he won’t accept tariffs below 15% and hinted some could go as high as 50% ahead of the August 1 deadline.

Sterling Weakens from 2-Week High

The offshore yuan strengthened past 7.14 per dollar on Thursday, extending gains from the previous session and hitting its strongest level since November 2024 amid growing optimism over US-China trade negotiations. Earlier this week, US Treasury Secretary Scott Bessent confirmed that American and Chinese officials are set to meet in Stockholm next week for a third round of high-level discussions, which could result in an extension of the current pause in trade tensions, set to expire on August 12. Market sentiment was further lifted by a series of regional trade deals that have offered relief to several Asian economies—most notably Japan, Indonesia, and the Philippines—while others remain on the sidelines. Meanwhile, President Donald Trump hinted at a possible visit to China, signaling a step toward stabilizing bilateral trade relations. Investors are now closely watching this weekend’s industrial profits report for clues on how Chinese firms are coping with lingering tariff pressures.

Offshore Yuan Reaches Over 8-Month High

The New Zealand dollar rose to around $0.605 on Thursday, reaching its highest level in more than two weeks, amid a softer US dollar and improved global risk sentiment following progress in trade talks between the US and key partners. The EU and the US are reportedly moving towards an agreement that would set a 15% tariff on most imports from the bloc—a structure similar to a deal struck with Japan on Tuesday. On the domestic front, RBNZ Chief Economist Paul Conway said on Thursday that tariffs could weigh on the global economy and dampen demand, adding that the country will continue to closely monitor incoming data. Currently, markets are pricing in an 80% probability of a 25bps cut in August, following weaker-than-expected Q2 CPI data and a sharp narrowing in the trade surplus. However, investors increasingly believe the RBNZ may be approaching the end of its easing cycle.

New Zealand Dollar Hits Over 2-Week High

The South Korean won strengthened past 1,370 per dollar on Thursday, hitting an over two-week high amid upbeat economic data that pointed to a stronger-than-expected recovery and a weaker dollar. Preliminary figures showed that South Korea’s economy grew by 0.6% in the second quarter compared to the previous three months, outpacing the 0.5% growth forecast. Much of the momentum came from a 4.2% quarterly jump in goods and services exports, driven by strong gains in semiconductors, petroleum products, and chemicals. On the external front, the upcoming high-level trade talks between South Korea and the US, originally set for Friday in Washington, have been postponed due to a scheduling conflict. While the “2+2” dialogue has been delayed, US officials have suggested rescheduling soon, and both sides are working to arrange a new date at the earliest opportunity.

South Korean Won Rises on Solid GDP Data

The Japanese yen strengthened past 146 per dollar on Thursday, reaching a two-week high as optimism surrounding the new US-Japan trade deal lifted demand. The agreement sets a 15% tariff on Japanese exports to the US, notably lower than the 25% previously threatened by President Donald Trump. Broader risk sentiment also improved amid reports of progress in US-EU trade talks. On the domestic front, Japan’s private sector growth held steady in July, supported by solid services activity, though manufacturing slipped into contraction. However, the yen faces potential downside pressure from rising political uncertainty. Reports suggest Prime Minister Shigeru Ishiba may be considering resignation, which he has denied. The speculation follows the ruling coalition’s loss of its upper house majority in weekend elections, raising concerns over leadership stability.

Japanese Yen Hits 2-Week High on Trade Deal Boost

The US dollar index slipped toward 97 on Thursday, nearing a three-week low, as progress in trade talks with major partners lifted rival currencies. Reports indicated that the US and EU are moving closer to a deal, with discussions centered around a 15% baseline tariff on EU goods and possible exemptions. Earlier this week, Japan agreed to a similar 15% tariff on its exports to the US, a reduction from the 25% previously threatened by President Donald Trump. Additionally, Treasury Secretary Scott Bessent signaled that the current tariff truce with China is likely to be extended beyond its August 12 expiration, further improving risk sentiment. These developments supported a broad rally in the euro, yen, and other risk-sensitive assets, putting pressure on the dollar. On the policy front, the Federal Reserve is expected to remain cautious about additional rate cuts, amid concerns that Trump's tariffs could stoke inflation.

Dollar Weakens as Trade Progress Boosts Other Currencies

The Australian dollar strengthened to around $0.661 on Thursday, extending its five-session rally to hit its highest level since November last year, fueled by optimism over latest global trade developments. The US and EU are reportedly close to a trade deal that would impose 15% tariffs on most imports while waiving duties on select items, according to European Commission officials. Treasury Secretary Scott Bessent also confirmed that US and Chinese officials will meet in Stockholm next week for further talks. These developments follow a recent US–Japan tariff agreement that helped ease global trade tensions. The US has also secured separate deals with the Philippines and Indonesia. In Australia, business activity expanded at its fastest rate since April 2022 in July, boosted by the first rise in manufacturing output in three months and a sharp acceleration in services, fueled by strong new orders and ongoing hiring—even as export demand remained weak and business confidence softened.

Australian Dollar Rallies to 8-Month High

The Chinese Yuan touched 7.15 against the USD, the highest since November 2024. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.23%, and in the last 12 months, it decreased 1.24%.

Chinese Yuan Hits 36-week High

The euro rose to $1.175, remaining relatively close to its highest level since August 2021 amid signs of an imminent trade agreement between the US and the EU. Reports indicated that EU diplomats were set to agree to US tariffs on the EU to 15%. If confirmed, the move would prevent the US from setting tariffs on 30% on EU goods, as previously threatened, to limit damages of the trade war that magnify the bloc's growth threats. Headwinds to European economic activity stemmed from US trade war had driven markets to consider that the ECB could make dovish adjustments to its outlook amid the risk that inflation could undershoot its target. On Thursday, the ECB is widely expected to keep interest rates unchanged after eight consecutive cuts, with rate futures pricing another 25bps cut to be delivered by the end of the year. Conversely, two 25bps rate cuts are priced by the Fed this year.

Euro Extends Gains on Likely Trade Agreement

The dollar index fell further to the 97.4 mark on Wednesday as investors digested the latest developments to US trade policy. Reports indicated that the US is set to lower tariffs on the EU to 15% from the previous threats of 30%. If followed through, the move would be consistent with the decrease in the tariff rate applied to Japan following their fresh deal, while Japan pledged to invest 15% tariff on Japanese exports to the US. He also said Japan will invest $550 billion into the US. While the developments supported US growth, unchanged capital flows with Japan and boost on the euro following trade rumors limited support for the DXY. Adding to the trend, Treasury Secretary Bessent signaled that the current tariff truce with China is likely to be extended ahead of its August 12th expiration. On the monetary policy front, minutes from the latest FOMC meeting revealed that several members view tariffs as inflationary, prompting the Fed to hold off on further rate cuts for now.

DXY Holds Sharp Pullback

The Brazilian real hovered around 5.55 per USD, near early-June lows as investors grappled with the potential for steep US tariffs while political turmoil compounded to stoke caution among investors. President Trump’s threat of 50% US tariffs on Brazilian exports from August 1st, and the drawn-out negotiations over whether and how those levies might be delayed, has sapped appetite for Brazilian assets, even as Treasury Secretary Bessent floated a possible 90-day extension for China and other trading partners. At home, the currency’s weakness has been exacerbated by political instability, the Supreme Court’s probe into former President Bolsonaro’s alleged election interference and his legal team’s rapid filings to Justice Moraes have cast doubt on Brazil’s ability to advance much-needed fiscal and pension reforms amid persistently large primary deficits. On the global stage, a firmer US dollar and higher Treasury yields have further strained emerging-market currencies.

Brazilian Real Hovers Near Early-June Lows

The euro traded above $1.17, remaining close to its highest level since August 2021, as optimism grew over a potential trade agreement between the US and the European Union following the announcement of a US-Japan deal. However, investor caution lingered ahead of renewed tariff negotiations between Washington and Brussels, amid reports that the EU is preparing countermeasures in case talks stall before the August 1 deadline. Meanwhile, markets are focused on Thursday’s European Central Bank policy decision and the release of flash PMI data from the eurozone’s largest economies. The ECB is widely expected to keep interest rates unchanged after eight consecutive cuts, as policymakers weigh the potential impact of steeper-than-expected US tariffs and a stronger euro on growth and inflation. Money markets are fully pricing in a 25 basis point rate cut by December, with roughly a 50% chance of it coming as early as September.

Euro Remains Close to Four-Year High Amid Renewed Trade Optimism

The British pound rose to $1.354, its highest in about two weeks, as risk appetite improved following a US-Japan trade deal. The agreement includes a 15% tariff, avoiding the harsher 25% rate previously planned, and features a $550 billion investment fund for the US. President Trump called it “a great deal for everybody,” boosting global trade sentiment. In the UK, attention turns to key economic data. Flash PMIs are expected to show the mildest manufacturing contraction in six months and the strongest services growth in nearly a year. Retail sales are also projected to rebound, helped by hot weather. Meanwhile, the UK posted a £20.7 billion budget deficit for June, marking the second-highest June figure since 1993. Interest payments hit £16.4 billion, driven by inflation-linked gilt costs. This surge in borrowing raises speculation that Chancellor Rachel Reeves may need to raise taxes in the autumn.

Sterling Climbs Toward 2-Week High

The Japanese yen weakened toward 147 per dollar on Wednesday, snapping a two-day rally as political uncertainty weighed on sentiment. Reports suggested Prime Minister Shigeru Ishiba may soon resign, despite the announcement of a new trade deal with the US. Ishiba denied the speculation, saying he had “never discussed” stepping down. Tensions escalated after the ruling coalition lost its majority in the upper house during weekend elections, adding to investor concerns about leadership stability. US President Donald Trump added to market volatility by unveiling a trade agreement with Japan that includes a 15% tariff on Japanese exports. He also said Japan will invest $550 billion into the US and open its markets to key American goods. Ishiba, while confirming he had been briefed on the deal, offered no specifics and reiterated his commitment to defending the “national interest.”

Japanese Yen Slips on Political Uncertainty

The offshore yuan edged higher to around 7.16 per dollar on Wednesday, hitting its highest level in over two weeks, as investors kept a close eye on developments in US-China trade relations. On Tuesday, US Treasury Secretary Scott Bessent announced that American and Chinese officials will meet in Stockholm next week for a third round of high-level talks, following his recent in-person meetings with Chinese Vice Premier He Lifeng in Geneva and London, aimed at negotiating a likely extension of the current pause in trade tensions beyond mid-August. The ongoing discussions aim to craft a provisional trade truce designed to ease tensions in the intensifying tariff standoff, which has already seen both nations impose steep, triple-digit duties and sparked fears of a severe disruption to bilateral trade. Externally, the yuan's appreciation was also supported by a weaker greenback, after President Trump's announcement of a trade agreement with Japan ahead of a looming tariff deadline.

Offshore Yuan Edges Higher

The New Zealand dollar strengthened past $0.60 on Wednesday, marking its fourth consecutive session of gains, after President Donald Trump announced a trade deal with Japan, easing tariff war concerns. The agreement includes a 15% tariff on all imported Japanese goods, down from a proposed 25%, and Japan will invest $550 billion in the US. Domestically, data released earlier this week showed New Zealand's annual inflation rose to a one-year high in the second quarter but was slightly below forecasts, while the trade surplus narrowed sharply in June—reinforcing expectations of a rate cut next month. Markets now price in an 80% chance of a 25bps cut in August, though investors believe the easing cycle may be nearing its end. Traders will be closely watching RBNZ Chief Economist Paul Conway’s speech on the economic impact of tariffs on Thursday, which could offer further insight into the likelihood of an August rate cut.

New Zealand Dollar Extends Gains

The dollar index stabilized around 97.5 on Wednesday, pausing a three-session slide as investors weighed the latest trade developments. President Donald Trump announced a trade agreement with Japan that includes a 15% tariff on Japanese exports to the US. He also said Japan will invest $550 billion into the US and open its markets to key American goods. Adding to the cautious optimism, Treasury Secretary Scott Bessent signaled that the current tariff truce with China is likely to be extended ahead of its August 12 expiration. The dollar had come under pressure in recent days amid rising uncertainty surrounding the August 1 deadline for most countries to finalize trade deals with Washington, raising concerns about a potential escalation in global tariffs. On the monetary policy front, minutes from the latest FOMC meeting revealed that several members view tariffs as inflationary, prompting the Fed to hold off on further rate cuts for now.

Dollar Steadies as Trump Announces Japan Trade Deal

The South Korean won held steady at around 1,378 per dollar on Wednesday, remaining near last week’s lows amid muted movement in the US dollar index. The won’s stability followed the departure of Industry Minister Kim Jung-kwan on Wednesday as he joins fellow South Korean officials already in the US for talks with the Trump administration figures ahead of the August 1 deadline. South Korea has been engaged in negotiations with the US for months to secure relief or reduction from the planned 25% reciprocal tariffs, as well as sectoral levies affecting steel and automobile exports. Adding to the momentum, the Bank of Korea reported that the Composite Consumer Sentiment Index rose 2.1 points to 110.8 in July, the highest since January 2018. The gain was driven by the administration’s pro-growth initiatives, including a 31.8 trillion-won supplementary budget approved on July 4, stronger consumer spending, and a rebound in semiconductor exports.

SK Won Steady as Seoul Intensifies Push for Tariff Relief

The Australian dollar edged higher to around $0.656 on Wednesday, marking its fourth straight session of gains, supported by improved market sentiment amid fresh global trade developments. This followed Tuesday’s announcement by US President Donald Trump of a major tariff deal with Japan, including a 15% levy on Japanese exports, while US–China trade talks are also gaining momentum ahead of the August 12 deadline. Treasury Secretary Scott Bessent is set to meet Chinese officials next week in Stockholm to seek a deadline extension and promote US exports. Domestically, latest data showed the Westpac Leading Index slowed to 0.03% in June, reflecting weaker momentum due to softer commodity prices and reduced work hours. Markets also weighed the Reserve Bank’s cautious stance, with meeting minutes showing members favor a gradual easing path and prefer to await clearer signs of slowing inflation. Focus now shifts to PMI data due later today for insight into July’s business conditions.

Australian Dollar Rises for 4th Session

The Japanese yen held its recent advance to around 146.5 per dollar on Wednesday, hovering at a near two-week high following news of a trade agreement between the US and Japan. The deal, announced by President Donald Trump, includes a 15% tariff on Japanese exports to the US. Trump also stated that Japan will invest $550 billion into the US and open its markets to key American goods. Prime Minister Shigeru Ishiba confirmed he had been briefed on the negotiations but offered no details, reaffirming his commitment to protecting the “national interest.” Separately, reports suggested Ishiba is considering stepping down, depending on the outcome of tariff talks. Political uncertainty deepened after the ruling coalition lost its majority in the upper house in weekend elections, a development that comes as Japan faces growing pressure from US trade policy.

Japanese Yen Holds Gains After US Trade Deal

The dollar index was below 97.7 on Tuesday, extending the pullback from the four-week high of 99 on July 17th as markets continued to assess the latest developments to US trade policy and how it may impact Fed rate decisions. Treasury Secretary Bessent noted that the administration prioritizes the quality of trade agreements over timing, downplaying the number of trade deals to be struck in the next two weeks and potentially paving the way for aggressive tariffs to be enforced at the start of August. Remarks from selected Fed officials and the latest FOMC minutes indicated that multiple members see tariffs as inflationary, driving the central bank to delay the continuation of rate cuts. Softening concerns, Bessent also noted that the current tariff truce with China will likely be extended next week ahead of their August 12th expiration. Among major pairs in the index, the yen gained as Japan's Prime Minister Ishiba is expected to stay in office and fend off political instability.

DXY Extends Pullback

The Mexican peso steadied around 18.68 per USD, near its one-year high of 18.60 reached on July 10th, supported by external dollar weakness, preserved tariff-free access under USMCA and attractive domestic interest differentials. The US Dollar Index declined as confidence grew that Washington’s August 1st tariff deadline would not derail trade, and Mexico has so far avoided reciprocal levies thanks to President Trump’s temporary pause on new tariffs, underpinning export competitiveness and easing current-account pressures. At home, after cutting its key rate by 50 bps to 8.00% on June 26th amid 4.51% annual inflation in July and modest GDP growth with lingering slack, Banxico signaled further 50 bps reductions as disinflation takes hold, while remaining ready to pause should renewed trade tensions or geopolitical shocks threaten peso depreciation and rekindle inflation expectations, thereby sustaining elevated real yields and reinforcing the peso’s appeal.

Mexican Peso Near 1-Year Highs

The dollar index was below 98 on Tuesday, holding the pullback from the four-week high of 99 touched on July 17th as markets continued to assess the latest developments to US trade policy and how it may impact Fed rate decisions. Treasury Secretary Bessent noted that the administration prioritizes the quality of trade agreements over timing, downplaying the number of trade deals to be struck in the next two weeks and potentially paving the way for aggressive tariffs to be enforced at the start of August. Remarks from selected Fed officials and the latest FOMC minutes indicated that multiple members see tariffs as inflationary, driving the central bank to delay the continuation of rate cuts. Among major pairs in the index, the yen gained as Japan's Prime Minister Ishiba is expected to stay in office and fend off political instability. Also, the ECB is expected to halt its cutting momentum this week, potentially narrowing the rate differential with the Fed by the end of Q3.

US Dollar Holds Pullback

The Indian rupee weakened past 86.35 per USD in July, the lowest in one month, as the dollar halted its slide and traders considered a dovish RBI and the pessimistic trade outlook with the US. India's trade delegation noted that an interim deal with the US looks difficult before the August 1st deadline, likely resulting in aggressive tariffs on India in the coming weeks, and reducing export demand for Indian conglomerates. This was magnified by US President Trump's tariff threats on BRICS members and countries re-exporting Russian energy goods, jeopardizing foreign capital inflows. On the monetary policy front, consumer inflation feel to a a six-year low of 2.1%, well below market expectations, to test the lower bound of the RBI's inflation tolerance band of 2%. Consequently, markets expect the RBI to continue reducing its benchmark policy rate this year.

Indian Rupee Weakens to 1-Month Low

The Indian Rupee touched 86.34 against the USD, the lowest since June 2025. Over the past 4 weeks, US Dollar Indian Rupee gained 0.02%, and in the last 12 months, it increased 3.14%.

Indian Rupee Hits 4-week Low

The Australian dollar steadied around $0.652 on Tuesday, following two consecutive sessions of gains, as investors digested the latest minutes from the RBA's meeting. The central bank considered a third rate cut in four meetings but chose to hold steady, deeming it inconsistent with its cautious easing strategy. Most members favored waiting for more concrete signs that inflation was sustainably returning to target before taking further action, while a minority supported a cut due to global and domestic growth risks. Nevertheless, markets now see a 91% probability of a rate cut on August 12 policy meeting. Meanwhile, trade relations between Australia and the US remain under scrutiny, as Prime Minister Anthony Albanese downplayed concerns over the absence of a meeting with US President Donald Trump. He emphasized that no other country has secured more favorable trade terms with the current administration, while reiterating that Australia values mutual respect in its partnerships.

Australian Dollar Steady

The New Zealand dollar fell to around $0.596 on Tuesday, giving back recent gains amid growing expectations that the Reserve Bank will resume monetary easing due to soft economic data. Annual inflation rose to a one-year high but came in below forecasts, while quarterly CPI slowed further and also missed expectations. Analysts said the data gives the RBNZ little reason to expect CPI to reach the top of its 1–3% target band this year, reinforcing the case for a rate cut at the August meeting. Market odds for a cut rose to 85% from 61% before the inflation release. Adding to the dovish outlook, the trade surplus narrowed sharply in June to a five-month low, as imports surged 19%, outpacing export growth of 10%. Meanwhile, global trade concerns continued to weigh on sentiment after US Treasury Secretary Scott Bessent said the administration prioritizes the quality of trade deals over timing, with President Trump to decide whether to extend deadlines for countries showing progress.

New Zealand Dollar Declines

The offshore yuan hovered around 7.17 per dollar on Tuesday, trading in a narrow band, as markets continued to monitor fresh cues on Sino-US trade developments. China's commerce minister said last week that Beijing aims to stabilize trade ties with Washington, citing recent EU talks as evidence that a tariff war is unnecessary and urging the US to act responsibly. Analysts noted that as August nears, markets are likely to shift focus toward evolving tariff expectations and upcoming US Fed Reserve appointments. Additionally, the PBOC recently left key lending rates unchanged, a steady policy stance that has also limited yuan volatility. Separately, China’s Conflux Network launched a new offshore yuan-based stablecoin, a move seen as bolstering long-term CNH liquidity and advancing Beijing’s efforts to internationalize the yuan. Markets now await the upcoming Politburo meeting, expecting a supportive policy tone but limited scope for major stimulus following stronger Q2 GDP growth.

Offshore Yuan Trades Sideways

The South Korean won weakened to around 1,384 per dollar on Tuesday after holding steady for two consecutive sessions, as risk sentiment deteriorated amid elevated uncertainty with ten days remaining until the August 1 tariff deadline. Finance Minister Koo Yun-cheol announced on July 22, that he and Trade Minister Yeo Han-koo will travel to Washington for a high-level “2+2” meeting with US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer. The talks, scheduled for Friday, are intended to address outstanding issues related to the proposed US tariff measures. Separately, First Vice Industry Minister Moon Shin-hak noted that efforts are ongoing to conclude the negotiations and mitigate risks to export-oriented sectors, which remain sensitive to external policy developments. However, the proximity of the deadline and the lack of concrete progress thus far have continued to exert downward pressure on the won.

South Korean Won Slips as Tariff Deadline Nears

The Japanese yen hovered around 147.5 per dollar on Tuesday after gaining about 1% in the previous session, as investors continued to digest the weekend’s election outcome. While the ruling coalition lost its majority in the upper house, the result was largely priced in. Crucially, Prime Minister Shigeru Ishiba is expected to stay in office, easing fears of political instability or a sudden resignation. Ishiba reiterated his commitment to overseeing ongoing tariff talks with the US and managing other key policy matters. Meanwhile, opposition parties are expected to push for increased fiscal stimulus and tax cuts, moves that could weigh on the yen and push government bond yields to multi-year highs. On the trade front, Japan’s chief negotiator Ryosei Akazawa said Monday he still aims to reach an agreement with the US by the August 1 deadline despite the election setback.

Yen Strengthens as Ishiba Maintains Leadership

The dollar index remained below 98 on Tuesday after sliding for two straight sessions, as investors awaited progress on trade talks ahead of the August 1 deadline for countries to reach deals with the US. Treasury Secretary Scott Bessent said Monday that the administration prioritizes the quality of trade agreements over timing. He noted that President Donald Trump would decide whether to extend the deadline for countries making productive progress with Washington. On the monetary front, markets are watching for comments from Federal Reserve Chair Jerome Powell at a Washington event later today for signals on interest rate policy. While Trump continues to pressure the Fed to cut rates, traders are not yet pricing in a move this month.

Dollar Pressured by Trade Uncertainty

The British pound climbed to $1.35, supported by broad dollar weakness, as market sentiment stayed cautious amid rising uncertainty over US tariffs and concerns about the Federal Reserve’s independence. With the August 1 deadline approaching, US Commerce Secretary Lutnick reiterated it as a "hard deadline" for implementing tariffs, though negotiations are ongoing. In the UK, focus shifts to key data: flash PMIs are expected to show the mildest manufacturing contraction in six months and the strongest services growth in nearly a year. Retail sales are also forecast to rebound, supported by hot weather. Meanwhile, the Bank of England may slow or pause sales of long-dated bonds due to weak demand from traditional buyers like pension funds. Traders slightly lowered expectations for BoE policy easing but still see two rate cuts in 2025.

Sterling Strengthens at Start of the Week

The US dollar index extended its decline on Monday, slipping below the 98 mark and moving closer to the 2022 lows revisited last month. Investor sentiment remained cautious amid heightened uncertainty surrounding upcoming tariffs and growing concerns over the Fed’s independence. With the August 1st deadline approaching, Commerce Secretary Lutnick reaffirmed it as a "hard deadline" for countries to begin paying tariffs, although negotiations are expected to continue. Adding to market unease, Treasury Secretary Bessent called for a re-evaluation of the Fed as an institution. President Trump’s renewed criticism of Chair Powell for not cutting interest rates has fueled speculation that Powell could be dismissed. Despite the recent pullback, the greenback remains up nearly 1% for July, positioning it for its first monthly gain of 2025. The advance has been supported by stronger-than-expected economic data, which has tempered market expectations for Fed rate cuts this year.

Dollar Falls for 2nd Day

The euro held steady just above the $1.16 mark as investors awaited the European Central Bank's policy decision and kept a close eye on EU-US trade developments. The ECB is expected to leave interest rates unchanged on Thursday after eight consecutive cuts, with policymakers adopting a wait-and-see approach amid uncertainty over the impact of steeper-than-expected US tariffs and a stronger euro on European growth and inflation. At the same time, EU envoys are preparing to meet as early as this week to discuss contingency measures in case of a no-deal outcome with US President Donald Trump, whose tariff stance appears to have hardened ahead of the August 1 deadline.

Euro Steady Ahead of ECB Decision and EU-US Trade Talks

The Australian dollar depreciated past $0.65 on Monday, extending losses from the previous week, as market sentiment remained subdued ahead of this week’s release of the RBA meeting minutes and a speech by Governor Michele Bullock. This followed the RBA's unexpected decision to leave its benchmark interest rate unchanged at 3.85%, contrary to widespread expectations of a 25 bps cut. Nevertheless, economists anticipate a gradual shift toward monetary easing later this year, with current forecasts indicating that the cash rate could decline to around 3.1% by early 2026, supported by a stable labor market and cautiously improving economic growth prospects. Meanwhile, investors continued to grapple with concerns over evolving US trade policies, as Australia weighed the impact of potential US tariffs of up to 200% on pharmaceutical goods. While affirming its commitment to fair trade, the Australian government reiterated that it will not negotiate on its existing drug subsidy policies.

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