Asia FX ticks up; Japan markets caught between trade optimism, political flux

Investing.com-- Most Asian currencies edged higher on Wednesday as the dollar remained weak, while the yen was largely steady after briefly rising on U.S. President Donald Trump’s announcement of a major trade deal with Japan.

Investor sentiment in Japan remained cautious amid ongoing political uncertainty, following the ruling coalition’s defeat in upper house elections and growing speculation over Prime Minister Shigeru Ishiba’s potential resignation.

Elsewhere, market participants remained on edge ahead of Trump’s August 1 tariff deadline.

The US Dollar Index, which measures the greenback against a basket of major currencies, was steady in Asia hours after three consecutive losses.

US Dollar Index Futures were also largely unchanged.

US, Japan sign trade deal; yen muted amid political uncertainty

President Trump announced on Tuesday that Washington and Tokyo have struck a broad trade deal that includes a 15% tariff on all imported Japanese goods, down from a previously proposed 25%. 

The U.S. secured a massive $550 billion Japanese investment in the U.S. economy under the deal. The agreement opens Japanese markets to U.S. exports, including autos, agricultural goods, and energy products.

Japanese stock markets surged following the deal announcement, but the yen’s gains were short-lived, with the currency returning to flat levels amid heightened political uncertainty.

The yen’s USD/JPY pair traded 0.1% higher as of 03:45 GMT.

The Mainichi newspaper reported that Japanese Prime Minister Shigeru Ishiba plans to formally announce his resignation by the end of August.

The decision comes amid growing internal criticism after his Liberal Democratic Party’s ruling coalition suffered a defeat in the upper house elections last weekend.

Asia FX ticks up ahead of tariff deadline, Fed meet

Both the onshore USD/CNY and offshore USD/CNH Chinese yuan pairs traded 0.1% lower on Wednesday.

Other Asian currencies also showed marginal moves amid tariff caution.

Investors also await the U.S. Federal Reserve’s interest rate decision scheduled for next week.

The South Korean won’s USD/KRW fell 0.3%, while the Singapore dollar’s USD/SGD pair traded marginally lower.

The Australian dollar’s AUD/USD gained 0.3%.

Elsewhere, the Indian rupee’s USD/INR inched up 0.1%, while the Malaysian ringgit’s USD/MYR lost 0.1%.