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Investing.com-- Most Asian currencies kept to a tight range on Tuesday amid heightened uncertainty over U.S. trade tariffs before President Donald Trump’s July 9 deadline, while the dollar struggled to make headway.
The greenback was pressured largely by increasing expectations that the Federal Reserve will cut interest rates in the coming months. Political sparring over a sweeping tax and spending cut bill also weighed on the greenback, especially amid concerns over what the bill could entail for U.S. debt.
Among Asian currencies, the Australian dollar’s AUDUSD pair fell 0.3%, pointing to a risk-averse move in the region.
The South Korean won’s USDKRW pair rose 0.1%, while the Singapore dollar’s USDSGD and the Indian rupee’s USDINR were flat.
The Chinese yuan’s USDCNY pair was flat but close to its strongest level since November following some upbeat purchasing managers index data this week. Caixin PMI data on Tuesday showed China’s manufacturing sector rose back into expansion territory in June, as local manufacturers benefited from Washington and Beijing agreeing to temporarily slash their respective trade tariffs.
Japanese yen firms; Trump issues trade warning for Tokyo
The yen benefited from some haven demand, with the USDJPY pair falling 0.2%.
Trump on Monday lashed out against Tokyo for alleged unwillingness to buy American-grown rice, while also hinting at ending trade talks with Tokyo.
Trump referred to the country as “spoiled” over rice imports, and warned that he would send Tokyo a letter which will likely set increased trade tariffs against the country.
Trump’s comments come amid ongoing, high-level trade talks between Tokyo and Japan, although no agreement has been reached. Japan has largely stuck to its demand to be exempted from all U.S. tariffs.
Japanese officials signaled on Tuesday that they were still pushing for a tariff agreement with the U.S., but would not compromise the country’s agricultural industry for a deal.
The sparring comes with just over a week left until Trump’s July 9 deadline for countries to reach trade deals with Washington, or face steep tariffs on their exports to the United States.
Japan is also facing a major rice shortage that pushed local rice prices to multi-year highs, a trend that stands to factor into higher food inflation.
Dollar pinned near three-year low amid rates, debt speculation
The dollar index and dollar index futures both fell slightly in Asian trade and were close to lows last seen in early-2022.
The greenback was pressured by increased speculation that the Federal Reserve will cut interest rates by September, with Goldman Sachs analysts stating that such a scenario was likely.
Political sparring over Trump’s “big beautiful bill” also weighed on the dollar, amid growing concerns that the bill will increase the government deficit if passed in its current state.
The tax and spending cut bill, which is currently being debated in the Senate, proposes to extend Trump’s 2017 tax cuts, while also outlining cuts to government spending on social security.
A non-partisan analysis showed the bill stands to increase government debt by $3.3 trillion in the next decade, raising concerns over the fiscal impact of the bill. Analysts have also warned that the bill will only provide a modest boost to the economy while increasing the fiscal deficit.