Asia FX retreats as dollar surges after court rules against Trump tariffs

Investing.com-- Most Asian currencies retreated on Thursday, coming under pressure from a stronger dollar after a federal court ruled against U.S. President Donald Trump’s ‘liberation day’ trade tariffs. 

Regional currencies were also spooked by the minutes of the Federal Reserve reiterating the central bank’s reasoning to hold interest rates, amid heightened uncertainty over the U.S. economy. 

Strength in the dollar, which also came amid a run-up in Treasury yields, quashed most Asian currencies, which also lagged a broader rally in risk-driven markets. 

Dollar firms as court rules against Trump tariffs 

The dollar index and dollar index futures both rose about 0.4% in Asian trade, extending a recent recovery into a third consecutive session.

The greenback was buoyed by bets on fewer trade-related headwinds for the U.S. economy, after the U.S. Court of International Trade ruled that Trump overstepped his authority with his trade tariff plans. 

The Manhattan-based court ruled that the Carter-ear International Emergency Economic Powers Act (IEEPA), which Trump had used for his tariff agenda, did not give the president sufficient authority to impose tariffs, and that the final decision remained with Congress. 

The court issued a 10-day deadline for Trump to reflect its ruling, with reports stating that the White House had almost immediately appealed the decision. 

While a blocking of Trump’s tariffs could spell lower uncertainty for the U.S. economy, analysts warned that the legal procedures following Wednesday’s ruling were likely to increase market uncertainty. 

MUFG Bank analysts said Trump’s tariffs were also likely to remain in place during the appeal process. 

The dollar is nursing steep losses so far in 2025, as it was battered by Trump’s erratic trade and policy decisions. U.S. Treasuries were also sold down heavily on concerns over U.S. fiscal health. 

Most Asian currencies retreated on Thursday, as the dollar recovered some measure of losses.

The Japanese yen was among the worst hit, with the USD/JPY pair rising 0.7%. Increased risk appetite also hurt the yen.

China’s yuan weakened slightly, with the USD/CNY pair rising 0.1% after it slid to a six-month low last week. 

The Singapore dollar’s USD/SGD pair rose 0.4%, while the Australian dollar’s AUD/USD pair was flat. 

The Indian rupee’s USD/INR pair rose 0.1%. 

South Korean won weakens after BOK rate cut

The South Korean won also lagged its peers on Thursday, with the USD/KRW pair rising 0.6% after the Bank of Korea cut interest rates by 25 basis points, as expected.

BOK Governor Rhee Chang-yong flagged the potential for deeper interest rate cuts, citing concerns over slowing economic growth in the country. Such a scenario bodes poorly for the won. 

The central bank also flagged heightened risks from global trade uncertainty and U.S. policies, keeping its messaging largely dovish. 

Still, recent weakness in the dollar saw the won remain in sight of a recent seven-month high against the greenback.