Asia FX gains some ground as dollar slides to 4-mth low on Trump tariff relief

Investing.com-- Most Asian currencies firmed on Thursday, while the dollar wallowed at four-month lows after the U.S. offered some concessions in recent trade tariffs against Canada and Mexico.

But sentiment still remained fragile as U.S. President Donald Trump made no exemptions in his 20% tariffs on China, drawing ire and retaliation from Beijing. 

Investors were digesting promises of more stimulus measures from China made at a high-level government meeting this week, while focus was also on key upcoming U.S. labor data. 

The Chinese yuan firmed slightly, while the Japanese yen steadied after logging strong gains on safe haven demand.

Risk-exposed Asian currencies such as the Australian dollar and South Korean won strengthened. 

Dollar at 4-mth low on tariff concessions; payrolls awaited 

The dollar index and dollar index futures steadied in Asian trade after sinking to early-November lows on Wednesday. 

Losses in the dollar came after Trump made a one-month exemption for U.S. automakers from recent tariffs on Canada and Mexico. Reports showed Trump was also considering exempting agricultural goods. 

The move drove some bets that Trump’s tariff agenda will not be as disruptive as initially feared, helping boost risk appetite and drawing more traders away from the dollar. 

The greenback was also pressured by strength in the euro, after Germany outlined plans for a massive fiscal overhaul to stimulate local growth and production. 

Markets were now awaiting more cues on U.S. interest rates, with key nonfarm payrolls data for February due on Friday. Any signs of persistent strength in the labor market give the Federal Reserve more headroom to keep interest rates higher for longer, which is positive for the dollar. 

Chinese yuan firms on strong fixing, stimulus hopes 

The Chinese yuan firmed slightly on Thursday, with the USD/CNY pair falling 0.1% after a substantially stronger-than-expected midpoint fix from the People’s Bank.

Sentiment towards China was also lifted by Beijing flagging plans for higher fiscal spending this year, aimed chiefly at shoring up weak consumption and supporting economic growth. 

But China offered few details on what the planned measures will entail, keeping markets uncertain over the country’s outlook. A brewing trade war with the U.S. is also expected to weigh on the Chinese economy this year. 

Broader Asian currencies were mostly positive amid improving risk sentiment. The Australian dollar’s AUD/USD pair added 0.1%, with further gains being stymied by weaker-than-expected trade data for January.

The Japanese yen’s USD/JPY pair moved little after sinking to a near five-month low this week, as safe haven demand for the currency rose sharply amid increased trade tensions. 

The South Korean won’s USD/KRW pair fell 0.4% after consumer price index inflation read slightly above expectations for February, although it still eased from the prior month. 

The Singapore dollar’s USD/SGD pair rose 0.1%, while the Indian rupee’s USD/INR pair steadied after breaking below 87 rupees this week.