Baku: Most Asian currencies showed signs of weakness on Monday, with the Chinese yuan particularly fragile amid limited relief on U.S. trade tariffs. Simultaneously, concerns over growing economic headwinds pushed the dollar to a three-year low.
According to Azeri-Press News Agency, the Japanese yen remained an outperformer, trading near its strongest level in six months, as demand for safe havens remained relatively high. The USD/JPY pair fell by 0.3% to 143.09 yen.
Other Asian currencies have been experiencing significant losses in recent weeks due to the escalating trade war between the U.S. and China. Both nations have imposed severe trade tariffs on each other. However, the White House offered a slight reprieve over the weekend by indicating that electronics would be exempt from President Donald Trump's 145% tariffs on China.
The Chinese yuan's USD/CNY onshore pair increased by 0.2% following another weak midpoint fix from the People's Bank of China. The pair remained close to a 17-year high hit last week. The PBOC has set a weaker midpoint for seven of the past eight sessions, with Beijing seen devaluing the yuan to counter the impact of steep U.S. trade tariffs. Last week, Trump increased tariffs on China to 145%, prompting Beijing to retaliate with 125% tariffs.
Trade data revealed that China's trade surplus exceeded expectations in March, with exports rising significantly before the imposition of the steep U.S. trade tariffs on China. While the exemption on electronics provides some relief to Chinese exporters, it is expected to be temporary, as Trump signaled the possibility of announcing separate tariffs on electronics as soon as this week.
The dollar index and dollar index futures both fell to their lowest levels since April 2022, continuing a trend of recent declines. Despite some relief over U.S.-China tariffs, the dollar remained pressured by heightened fears of a U.S. recession. A sustained selldown in Treasuries, which led to sharply rising yields, also impacted the greenback.
Federal Reserve officials have indicated that they will step in to support the U.S. economy amid ongoing challenges, although this could involve interest rate cuts, which would negatively impact the dollar. Several Fed officials, including Chair Jerome Powell, are expected to speak this week.
Broader Asian currencies moved within a flat-to-low range amid minimal relief from the U.S.-China trade conflict. The Singapore dollar's USD/SGD pair decreased by 0.2% even as the gross domestic product data showed softer-than-expected results for the first quarter of 2025. Singapore's central bank also slightly eased policy for the second time this year.
Furthermore, the South Korean won's USD/KRW rose by 0.5%, while the Australian dollar's AUD/USD pair increased by 0.2%. The Indian rupee's USD/INR pair fell by 0.4% in holiday-thinned trading.