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Investing.com-- Most Asian currencies clocked marginal gains on Thursday, tracking weakness in the dollar after weak U.S. payrolls data ramped up bets that the Federal Reserve will cut interest rates further.
Middling economic data from the region weighed on most currencies, while traders remained largely risk-averse in the face of heightened uncertainty over U.S. trade policies.
Focus this week is on more U.S. economic data, as well as a Reserve Bank of India interest rate decision. A potential call between U.S. President Donald Trump and Chinese President Xi Jinping will also be closely watched, although Washington and Beijing have provided few cues on when the dialogue will take place.
The Japanese yen weakened slightly, with the USDJPY pair rising 0.1% following weaker-than-expected wage income data for April. The reading raised questions over just how strong Japanese private consumption remained, which could cloud the outlook for growth in 2025.
The South Korean won firmed slightly, with the USDKRW pair down 0.1% after gross domestic product data showed the economy did not contract as much as initially estimated in the first quarter. Sentiment towards South Korea also remained upbeat after the liberal party won snap presidential elections held earlier this week, which could present more political stability in the country moving forward.
The Australian dollar’s AUDUSD pair fell 0.1% after trade data read weaker than expected for April, amid increased headwinds for the country’s key commodity exports.
The Singapore dollar’s USDSGD pair was flat.
Dollar weak after soft jobs data; nonfarm payrolls awaited
The dollar index and dollar index futures moved little in Asian trade after clocking overnight losses on Thursday.
The greenback was pressured by substantially weaker than expected ADP payrolls data, which showed major deterioration in the labor market in May.
The reading ramped up bets that sustained weakness in the U.S. economy will push the Fed into cutting interest rates further this year.
But the ADP data also came just ahead of nonfarm payrolls data on Friday. The soft ADP reading ramped up concerns over a weak government payrolls print, which could highlight growing risks to the U.S. economy.
Uncertainty over Trump’s trade policies remained in play, especially after the president doubled his steel and aluminum tariffs to 50% this week.
Trump’s Wednesday deadline for U.S. trading partners to submit their “best offers” for trade deals also appeared to have passed with no major agreements being announced.
Indian rupee under pressure ahead of RBI cut
The Indian rupee’s USDINR pair fell slightly on Thursday, although it was nursing some losses this week as traders positioned for a widely expected interest rate cut by the RBI.
The RBI is expected to cut rates by 25 basis points to 3.75% on Friday, its third such move after kicking off an easing cycle in February.
Traders were seen positioning for more potential rate cuts, especially amid signs of resilient Indian economic growth and cooling inflation.
But lower rates present more pressure for the rupee. A Reuters poll showed on Thursday that analysts expect the rupee to lag its Asian peers in 2025, with weak risk appetite likely to discourage any major buying in the Indian currency.