Asian Currencies Hold Steady as Dollar Near Seven-Week Low Ahead of U.S. Jobs Data

Asian currencies traded in narrow ranges on Thursday as investors balanced improving geopolitical sentiment in the Middle East against uncertainty over the U.S. Federal Reserve's next policy move. The U.S. dollar remained close to a seven-week low, with traders awaiting fresh labor market data that could shape expectations for September interest rates.

The U.S. Dollar Index (DXY) held around 99.7, remaining near its weakest level since mid-June after recent declines. Markets have become increasingly cautious as hopes for progress in negotiations surrounding the Strait of Hormuz eased concerns over global energy supplies, while investors refrained from taking aggressive currency positions ahead of key U.S. economic releases.

The Japanese yen was little changed, with USD/JPY hovering near 157.7 after recent gains supported by official intervention. While the Bank of Japan has continued to acknowledge rising domestic inflation pressures, uncertainty over the pace of future policy tightening has limited additional appreciation in the yen.

Across the region, most major currencies showed limited movement. China's onshore yuan (USD/CNY) and offshore yuan (USD/CNH) traded broadly flat, while the South Korean won edged lower. The Singapore dollar and Indian rupee also remained relatively stable, although the rupee continued to outperform many regional peers after strengthening in five of the previous seven trading sessions, helped by softer crude oil prices and the Reserve Bank of India's decision to keep its benchmark repo rate unchanged at 5.25%.

The Australian dollar slipped modestly despite data showing Australia's trade balance returned to a surplus in June. Stronger exports of non-monetary gold and other commodities provided support for the economy, but the currency saw little immediate benefit as global investors remained focused on broader macroeconomic developments.

Meanwhile, negotiations involving Iran and Oman over a proposed shipping arrangement through the Strait of Hormuz continued to attract market attention. Although officials described discussions as constructive, several key issues remain unresolved. The absence of a finalized agreement has kept traders cautious, particularly given the waterway's importance to global oil exports.

Why It Matters for Traders

The next major catalyst for foreign exchange markets will be the latest U.S. labor market data, including weekly jobless claims and Friday's nonfarm payrolls (NFP) report. A weaker-than-expected employment reading could reinforce expectations that the Federal Reserve will adopt a less aggressive policy stance, potentially extending recent pressure on the U.S. dollar and supporting higher-yielding Asian currencies.

At the same time, any breakthrough—or setback—in negotiations over the Strait of Hormuz could quickly influence oil prices, regional risk sentiment, and commodity-linked currencies. For traders across Southeast Asia, monitoring both geopolitical developments and U.S. economic data will remain essential, as these factors are likely to drive volatility in major currency pairs including USD/JPY, AUD/USD, USD/SGD, and USD/CNH in the coming sessions.