The dollar index extended losses to 97.8 on Monday, back again to 2022-lows, as traders dialed back some risk-off positioning while closely watching developments in the Israel-Iran conflict. Sentiment further improved following reports that Iran is signaling a willingness to resume negotiations over its nuclear program. The Wall Street Journal reported that Tehran has informed Arab officials that it is open to resuming negotiations, provided the United States refrains from participating in the attacks, citing officials. The news come as Israel and Iran continued to exchange attacks for a fourth consecutive day. Meanwhile, attention is turning to a busy week of monetary policy decisions, with a particular focus on the Fed. The Fed is widely expected to hold the federal funds rate steady, but markets will be closely analyzing the central bank’s updated economic projections, especially for insights into how policymakers view the broader economic impact of President Trump's policies.

Dollar Back to 2022-Lows

USDILS decreased to a 28-month low of 3.47. Over the past 4 weeks, US Dollar Israeli New Sheqel lost 1.5%, and in the last 12 months, it decreased 6.44%.

Israeli New Sheqel Hits 28-month High

The Canadian dollar strengthened toward 1.35 per USD in June, its strongest in over eight months, as a broad-based US dollar sell-off coincided with crude oil surging amid ongoing Israel-Iran hostilities. The US dollar dropped as traders dialed back risk-off positioning while monitoring successive missile exchanges and the specter of supply disruptions through the Strait of Hormuz despite international calls for de-escalation. Higher oil prices have directly boosted Canada’s energy export revenues, firmly underpinning the loonie. Investors are also focusing on the G7 summit for coordinated action on global flashpoints, from the Middle East and Ukraine to trade frictions, and a busy week of central-bank decisions. Meanwhile, the Bank of Canada’s outlook remains data-dependent.

Canadian Dollar Strengthens to Over 8-Month High

The euro hovered near $1.16, its strongest level since November 2021, as investors reacted to the increasingly divergent policy paths of the European Central Bank and the US Federal Reserve. The shift comes against a backdrop of rising oil prices, fueled by fears of supply disruptions stemming from escalating tensions between Israel and Iran, as well as ongoing trade tariff disputes. In the Eurozone, markets now price the ECB’s deposit rate at 1.79% by year-end, with the probability of a September rate cut slipping to 50%, down from 60%. ECB policymaker Joachim Nagel stressed the importance of maintaining policy flexibility, citing the complex global backdrop. Meanwhile, the Fed is widely expected to keep rates unchanged on Wednesday. Investor attention will focus on updated economic projections and the dot plot, with markets still anticipating a possible rate cut as early as September.

Euro Nears $1.16 as ECB-Fed Policy Divergence Grows

The Australian dollar strengthened to around $0.651 on Monday, reversing earlier losses as investors pared back risk-off positions amid signs that the Israel-Iran conflict may not intensify further. Still, caution lingered as both sides pledged further retaliation, stoking fears of a broader regional conflict. Adding support, the US dollar eased ahead of the Fed’s widely expected rate hold, with investors focused on updated economic forecasts and the potential impact of President Trump's policies. Meanwhile, mixed Chinese economic data for May limited gains, with stronger retail sales offset by weaker industrial output. Domestically, attention turned to Australia’s labor market data due Thursday, with forecasts pointing to a 25,000 job increase and steady 4.1% unemployment. The labor market’s resilience has cast doubt on a July rate cut, with market pricing currently showing a 75% chance. A stronger-than-expected report could further reduce those expectations and support the Aussie.

Australian Dollar Rises

The New Zealand dollar rose to around $0.604 on Monday, recovering from losses in the previous session, as investors unwound some risk-off positions amid signs that the Israel-Iran conflict may not escalate further. While markets now expect the tensions to remain contained, some caution lingers with both sides vowing continued retaliation. The Kiwi also found support from stronger-than-expected Chinese retail sales in May, given China’s role as a major trade partner, although weaker industrial output tempered the optimism. Domestically, a recent PMI survey showed the services sector remained deep in contraction, marking its sharpest decline since June 2024. Markets are now pricing in just one more rate cut from the RBNZ, likely by November, with investors awaiting key local data this week—including food inflation, consumer confidence, and Q1 GDP—for further clues on the economic outlook.

New Zealand Dollar Rebounds

The dollar index pared early gains to trade around 98 on Monday, hovering near its lowest levels since 2022, as traders dialed back some risk-off positioning while closely watching developments in the Israel-Iran conflict. The two nations continued to exchange attacks for a fourth consecutive day, defying international calls for de-escalation. Investors are also looking to the G7 summit for potential responses to global flashpoints, including the crises in the Middle East and Ukraine, as well as ongoing trade tensions. Meanwhile, attention is turning to a busy week of monetary policy decisions, with a particular focus on the Federal Reserve. The Fed is widely expected to hold the federal funds rate steady, but markets will be closely analyzing the central bank’s updated economic projections, especially for insights into how policymakers view the broader economic impact of President Trump's policies.

Dollar Pares Gains

The South Korean won rose to around 1,365 per dollar on Monday, marching back toward multi-month highs as investor optimism grew over President Lee Jae-myung’s corporate reform agenda. His plans to improve governance and boost shareholder returns have lifted both the won and local stocks, helping the currency stand out in global markets. The won also strengthened despite the broader trend of a stronger US dollar, driven by safe-haven demand amid Middle East tensions and reduced chances of US Federal Reserve rate cuts due to rising oil prices. While most currencies weakened, the won’s gains reflect growing investor confidence in South Korea’s policy direction, though it remains sensitive to global risks.

South Korean Won Rises on Reform Hopes

The offshore yuan held steady to around 7.18 per dollar on Monday, as markets digested a batch of mixed Chinese economic data that offered little clear direction for the currency. While retail sales rose at the quickest pace in over a year in May, industrial production underwhelmed, posting its weakest growth in six months and missing market projections. These figures reinforced concerns over uneven momentum in China’s economic recovery. Market caution also lingered over rising geopolitical tensions after Israel and Iran exchanged fresh attacks over the weekend, which drove safe-haven demand for the US dollar. Additionally, the yuan remained under pressure from ongoing trade uncertainty, as details on the US-China framework agreement were yet to be determined. Meanwhile, the People’s Bank of China set the daily midpoint rate slightly stronger than expected and injected liquidity via reverse repos to ease funding strains, signaling ongoing support amid uncertainty.

Offshore Yuan Muted After Mixed Data

The Japanese yen slipped past 144.2 per dollar on Monday, extending losses for a second consecutive session, as the US dollar strengthened on increased safe-haven demand. Those moves came as the attacks between Israel and Iran intensified over the weekend, with both nations targeting each other’s energy infrastructure, leading to further rally in oil prices. This would make the Federal Reserve less likely to cut interest rates further in the near-term as policymakers grapple with tariff-related and inflationary risks. Domestically, investors are focused on the Bank of Japan’s upcoming policy decision. The central bank is widely expected to keep interest rates unchanged this week as officials monitor global developments and assess the impact of rising oil prices on Japan’s inflation outlook.

Japanese Yen Weakens as Dollar Gains

The New Zealand dollar stabilized around $0.60 on Monday as fresh Chinese data helped offset some geopolitical risks. Chinese retail sales rose more than expected in May, providing some support to the Kiwi given China’s role as a major trade partner. However, weaker-than-expected industrial output tempered the optimism. Meanwhile, tensions in the Middle East continued to dampen risk sentiment, as Israel and Iran exchanged strikes for a third consecutive day on Sunday, with both nations vowing to continue retaliating. Domestically, a recent PMI survey showed that the services sector remained deeply in contraction, with the latest reading marking the steepest decline since June 2024. The weak data added to signs of a sluggish economy, strengthening the case for further rate cuts from the Reserve Bank. Traders are now awaiting a series of key economic data releases this week—including food inflation, consumer confidence, and Q1 GDP—for further insights into the economy’s health.

New Zealand Dollar Stabilizes

The Australian dollar held its recent decline to around $0.648 on Monday, as heightened geopolitical tensions in the Middle East continued to weigh on market sentiment. Risk aversion intensified after Israel and Iran launched fresh attacks over the weekend, targeting each other’s energy infrastructure and stoking fears of a broader regional conflict, which boosted safe-haven demand for the US dollar. Additionally, lingering trade uncertainties further pressured the Aussie, with markets still digesting the vague framework of a tentative US–China trade agreement announced last week. Meanwhile, mixed Chinese economic data for May failed to lift the Australian dollar, with retail sales showing moderate growth, industrial production slowing slightly, and fixed asset investment missing expectations—signaling uneven momentum in China’s recovery. At home, this week’s job market data will be closely watched for insights into Australia’s economic health and its impact on the RBA’s rate outlook.

Australian Dollar Remains Subdued

The US dollar index edged up to around 98.3 on Monday, extending gains from the previous session as escalating tensions between Israel and Iran and a spike in oil prices boosted demand for safe-haven assets. Over the weekend, the two countries continued targeting each other’s energy infrastructure, further fueling the rally in crude. Iran also signaled it may shut down the Strait of Hormuz—a key global oil transit route—raising additional concerns about global supply disruptions. This would make the Federal Reserve less likely to cut interest rates further in the near-term as policymakers grapple with tariff-related and inflationary risks. The central bank is widely expected to keep rates unchanged on Wednesday and markets imply no chance of a reduction in July either. Traders also look ahead to manufacturing data on Monday, retail sales figures on Tuesday and weekly jobless claims on Wednesday for further insight into the Fed’s next moves.

Dollar Strengthens on Safe-Haven Demand

The British pound eased toward $1.35 after hitting a three-year high of $1.363, as escalating Middle East tensions drove investors toward safe-haven assets amid fears of a wider conflict. Overnight, Israel struck Iran’s nuclear sites and key personnel, calling the operation necessary to counter an existential threat. Iran responded with hundreds of drones and warned of further retaliation. Meanwhile, data showed UK GDP fell 0.3% month-over-month in April—worse than the expected 0.1% decline—partly due to a sharp drop in exports to the US following new tariffs. Signs of economic strain and softer labor demand, highlighted by Tuesday’s employment data, have increased market expectations that the Bank of England will cut interest rates more aggressively than anticipated. At the same time, the pound continues to benefit from broad dollar weakness amid renewed US tariff threats and signs of easing inflation in the US.

Pound Slides from 3-Year High as Middle East Tensions Weigh

The Swiss franc traded around 0.81 per USD, hovering near its highest levels since 2011, amid a broad flight to safety driven by escalating tensions in the Middle East. Israel has launched a wave of strikes against Iran, targeting its nuclear infrastructure and military installations, killing two senior commanders. The Israeli government has warned of further action, while Iran has vowed retaliation. In addition to geopolitical risk, several other factors have contributed to the franc’s strength which is up about 10% so far this year. These include uncertainty surrounding President Trump's trade policies and broad-based dollar weakness, triggered by cooler inflation data and growing concerns over the US economic and fiscal outlook. Domestically, the Swiss National Bank (SNB) may soon reintroduce negative interest rates. Markets widely anticipate that the SNB will cut its key rate next week with some analysts even suggesting a move back into negative territory.

Swiss Franc Close to 2011-Highs

The euro eased to $1.15 after hitting a three-and-a-half-year high of $1.163 on June 12, as global markets were unsettled by escalating Middle East tensions. Overnight, Israel struck Iran’s nuclear facilities and key personnel, prompting fears of a wider conflict. Israel says Iran’s nuclear program is an existential threat and vows to continue its operations. Iran responded by launching hundreds of drones and warned of further retaliation. On the monetary policy front, the euro has been supported by diverging signals from the European Central Bank and the US Federal Reserve. Recent ECB comments reinforced expectations of a pause in its easing cycle to assess the impact of new US tariffs. Meanwhile, the dollar weakened amid softer US inflation data and rising trade tensions, fueling speculation that the Fed could cut rates as early as September.

Euro Dips from 3½-Year High as Middle East Tensions Escalate

The South Korean won weakened to around 1,365 per dollar on Friday, retreating from  a 34-week high as the currency depreciated due to the strengthening dollar. Investors sought safe-haven assets amid escalating tensions in the Middle East have added pressure on the global market. Israel announced a nationwide state of emergency and issued alerts over potential missile and drone assaults, intensifying geopolitical tensions and weighing on investor confidence. Further weakness in the won was driven by domestic factors, including President Lee Jae-myung’s proposed corporate governance reforms. While the plans boosted market optimism, they also raised concerns over implementation hurdles and potential impacts on corporate practices.

South Korean Won Slips on Rising Middle East Tensions

The offshore yuan weakened to around 7.18 per dollar on Friday, reversing gains from the previous session, as the US dollar strengthened amid increased safe-haven demand due to rising geopolitical tensions in the Middle East. Israel launched a preemptive strike against Iran, significantly raising fears of a wider regional conflict. In response, Iran’s Armed Forces General Staff issued a warning on Friday, stating that Israel and the US would "pay a very heavy price" for their actions. Meanwhile, in China, authorities announced plans to sign a new economic agreement with the 53 African nations with which it maintains diplomatic relations. The deal aims to eliminate all tariffs and broaden market access, extending benefits not only to least developed countries (LDCs) but also to middle-income nations. Investors are now turning their attention to a batch of key economic data set to be released next week, including figures on industrial output, retail sales, and the unemployment rate.

Offshore Yuan Weakens on Safe-Haven Dollar Demand

The Japanese yen appreciated toward 143 per dollar on Friday, rising for the third consecutive session as heightened geopolitical risks fueled demand for safe-haven assets. The move followed a sharp escalation in Middle East tensions after Israel launched a preemptive strike on Iran, targeting its nuclear infrastructure. Israeli officials vowed to continue the operation until the threat is neutralized, prompting risk aversion across global markets. Trade-related concerns also persisted after US President Donald Trump threatened unilateral tariffs aimed at pressuring other countries into new trade deals, adding to broader market uncertainty. On the domestic front, Bank of Japan Governor Kazuo Ueda told parliament earlier this week that the central bank is prepared to raise interest rates again—provided there is sufficient confidence that underlying inflation is sustainably approaching the 2% target.

Yen Strengthens on Safe-Haven Flows

The Indian rupee fell to an eight-week low of 86.17 on Friday morning amid rising geopolitical tensions and trade uncertainty. The decline followed Israel’s airstrikes on Iran without U.S. backing, sparking fears of Iranian retaliation and driving oil prices up nearly 10%. Higher oil prices raised concerns about India’s trade balance, pressuring the rupee further. Adding to the external stress, President Trump said he might extend the July 8 tariff deadline but also signaled a tougher stance by planning to send letters to trade partners outlining unilateral tariff rates. However, some losses were limited by signs of progress in U.S.-India trade talks, particularly on industrial goods, agriculture, and tariffs. India’s Foreign Ministry expressed hope of finalizing a deal before the truce expires. Domestically, inflation eased to 2.82% in May, the lowest since February 2019, down from 3.16% in April and below expectations, nearing the RBI’s lower 2% tolerance band.

Rupee Drops to 8-Week Low on Middle East Tensions and Trade Jitters

The Australian dollar weakened toward $0.649 on Friday, reversing gains from the previous session as risk sentiment soured amid escalating tensions in the Middle East. Following a preemptive strike on dozens of Iranian sites, Israel declared a nationwide state of emergency and warned of imminent missile and drone attacks. The escalation, driven by concerns over Iran’s nuclear program, fueled safe-haven demand and pressured risk-sensitive currencies like the Aussie. Adding to market worries, US President Trump expanded steel tariffs starting June 23 to include steel-based household appliances, doubling duties to 50% after initially imposing 25% tariffs in March. Investors also monitored US-China trade talks, which resulted in an agreement on a framework that keeps a deal possible, though details remain unclear. Looking ahead, attention turns to Australia’s May employment data due next week, which will provide fresh insight into the country’s economic health amid ongoing global concerns.

Aussie Dips on Rising Middle East Tensions

The New Zealand dollar dropped to around $0.603 on Friday, reversing gains from the previous session, as rising tensions in the Middle East rattled global markets, leading to a widespread risk-off approach. Israel launched airstrikes against Iran’s nuclear program and military targets, marking a major escalation in the standoff between the two countries and raised fears of a broader conflict in the region. Further weighing on the currency was disappointing domestic economic data. New Zealand’s manufacturing activity slipped back into contraction in May after four straight months of growth, weighed down by weak demand, rising costs, and waning business confidence amid global economic uncertainties. Despite Friday’s decline, the Kiwi remains on track for its second straight weekly gain.

New Zealand Dollar Slips Amid Risk-Off Sentiment

USDINR increased to an 8-week high of 86.17. Over the past 4 weeks, US Dollar Indian Rupee gained 0.66%, and in the last 12 months, it increased 2.99%.

Indian Rupee Hits 8-week Low

The US dollar index climbed above 98 on Friday, rebounding from multi-year lows as escalating geopolitical tensions in the Middle East fueled demand for safe-haven assets. The move followed Israel’s preemptive strike on Iran, targeting Tehran’s nuclear program and pledging to continue the operation until the threat is removed. US officials confirmed there was no American involvement or support in the strike. The dollar had slumped to over three-year lows on Thursday, pressured by growing uncertainty surrounding President Donald Trump’s aggressive trade stance, including renewed threats of unilateral tariffs. Additional downward pressure came from softer-than-expected consumer and producer inflation data, which reinforced expectations for further interest rate cuts by the Federal Reserve this year. Looking ahead, investors await the University of Michigan’s consumer sentiment report for June, which could offer insight into how evolving tariff policies are affecting household confidence.

Dollar Rebounds on Safe-Haven Demand

The Canadian dollar advanced to roughly 1.36 per USD in June, its strongest in eight months, primarily on broad US dollar weakness driven by softer-than-expected US inflation and a repricing of Fed policy. May’s CPI printed just 2.4% year-on-year, which sent Treasury yields lower and eroded the greenback’s carry appeal. Domestically, the Bank of Canada’s June decision to hold rates steady while dropping its tightening bias underscored a shift toward neutral, narrowing the policy differential with the Fed and lifting the loonie. April’s industrial output ticked up modestly and employment remains firm, suggesting the economy can absorb a more gradual US rate path. On the trade front, renewed US–China negotiations, culminating in pledges to revive the Geneva framework and lift rare-earth curbs, have dampened global tariff fears that once hung over Canada’s export sectors. Finally, strong oil prices have buoyed Canada’s terms of trade and further supported the currency’s advance.

Canadian Dollar Hits 8-Month High

The Indian rupee was little changed around 85.5 per USD, supported by lower oil prices and a softer dollar, though upside was capped by renewed foreign outflows, trade uncertainty and rising geopolitical risks. US President Trump told reporters on Wednesday that he could extend the 90-day tariff deadline, which is scheduled to expire on July 8, but signaled he would instead send letters to trading partners within two weeks outlining unilateral tariff rates. In the meantime, the China-US provisional agreement on rare earths and student visas failed to impress investors. In New Delhi, however, Indian and US officials made progress in talks on industrial goods, agriculture, and tariff barriers, with India’s Foreign Ministry expressing hope to finalize a trade deal before the truce ends. Meanwhile, India’s inflation eased to 2.82% in May, the lowest since February 2019, down from 3.16% in April and below market expectations, bringing it close to the RBI’s lower tolerance band of 2%.

Indian Rupee Sees Little Movement

USDSGD decreased to a 10-1/2-year low of 1.28. Over the past 4 weeks, US Dollar Singapore Dollar lost 1.74%, and in the last 12 months, it decreased 5.38%.

Singapore Dollar Hits 10-1/2-year High

The dollar index extended its decline on Thursday, falling below 97.8 to reach its lowest level since 2022, as renewed trade tensions and geopolitical risks weighed on sentiment. President Trump announced plans to send formal letters to major trading partners within the next one to two weeks, outlining unilateral tariff measures aimed at pressuring countries into new trade agreements. This comes as the current 90-day pause on reciprocal tariffs is set to expire next month. Adding to market unease, geopolitical tensions intensified after Iran threatened to strike US bases if nuclear talks collapse. Meanwhile, softer-than-expected US inflation data released on Wednesday added to the downward pressure on the greenback. The weaker inflation print bolstered expectations that the Federal Reserve will deliver two interest rate cuts this year. The dollar posted its steepest losses against the euro, Swiss franc, and Japanese yen.

Dollar Hits 2022-Lows

DXY decreased to a 3-year low of 97.86. Over the past 4 weeks, Dollar Index lost 3.09%, and in the last 12 months, it decreased 6.99%.

Dollar Index Hits 3-year Low

USDCAD decreased to a 35-week low of 1.36. Over the past 4 weeks, US Dollar Canadian Dollar lost 2.16%, and in the last 12 months, it decreased 0.79%.

Canadian Dollar Hits 35-week High

EURUSD increased to a 3-1/2-year high of 1.16. Over the past 4 weeks, Euro US Dollar gained 3.58%, and in the last 12 months, it increased 7.9%.

Euro Hits 3-1/2-year High

The Swiss franc appreciated nearly 1% to trade around 0.81 per USD, its highest level since April 2021, as ongoing trade uncertainties and heightened geopolitical tensions pressured the dollar and lifted demand for safe-haven assets. President Trump announced plans to send letters to key trading partners within two weeks, proposing unilateral tariffs after a fragile trade framework with China. Risk sentiment deteriorated further after he ordered preparations to evacuate Americans from the Middle East amid growing regional threats. Domestically, the combination of subdued price pressures and a weak economic outlook has raised speculation that the Swiss National Bank could reintroduce ultra-loose monetary measures, including a return to negative interest rates in the coming months. Consumer prices fell by 0.1% in May 2025 compared to a year earlier, marking the first deflationary print since March 2021. Markets widely expect the SNB to cut rates from 0.25% to 0% at its June 19 meeting.

Swiss Franc at Over 7-Week High

USDSEK decreased to a 12-month low of 9.47. Over the past 4 weeks, US Dollar Swedish Krona lost 2.44%, and in the last 12 months, it decreased 9.65%.

Swedish Krona Hits 12-month High

USDDKK decreased to a 3-1/2-year low of 6.45. Over the past 4 weeks, US Dollar Danish Krone lost 3.24%, and in the last 12 months, it decreased 7.12%.

Danish Krone Hits 3-1/2-year High

USDKRW decreased to a 34-week low of 1351.00. Over the past 4 weeks, US Dollar South Korean Won lost 4.46%, and in the last 12 months, it decreased 1.61%.

South Korean Won Hits 34-week High

The euro climbed above $1.15, its highest level since November 2021, as investors responded to diverging policy signals from the European Central Bank and the US Federal Reserve, and renewed trade war fears. Recent comments from ECB officials have reinforced expectations that the bank may soon pause its easing cycle, opting for a wait-and-see approach to gauge the economic fallout from new US tariffs. In May, Eurozone inflation slowed to 1.9%, while the ECB implemented its eighth consecutive rate cut, lowering the deposit facility rate to 2%. In contrast, the dollar weakened amid softer-than-expected US inflation data and escalating trade tensions, prompting speculation that the Fed could begin cutting rates as early as September. President Donald Trump added to market uncertainty on Wednesday, announcing plans to send letters to key trading partners within weeks outlining new unilateral tariff rates.

Euro Surges Past $1.15

The British pound hovered around $1.35, near its highest level in three years, supported by broad-based dollar weakness amid renewed tariff threats from President Trump and signs of cooling US inflation. In the UK, the GDP contracted by 0.3% in April, significantly more than the anticipated 0.1% decline. The downturn was driven by a combination of higher energy bills, increased National Insurance contributions, and elevated Stamp Duty Land Tax rates. Labour market indicators also pointed to a loss of momentum. Despite these headwinds, the Bank of England is widely expected to hold interest rates steady next week. Meanwhile, Chancellor Reeves unveiled a multi-year spending review, committing £2 trillion in public expenditures. The plan includes annual departmental budget increases of 2.3% in real terms, signaling continued support for key sectors. However, analysts highlighted the limited fiscal space outlined in the review, raising the likelihood of tax increases later this year.

Pound Holds Near 3-Year Highs

The offshore yuan rose to around 7.18 per dollar on Thursday, snapping a two-session losing streak, supported by a weakening US dollar. The greenback depreciated after US President Trump announced plans to send formal letters to major trading partners in the coming weeks, expected to outline unilateral tariffs aimed at pressuring countries into trade deals. Adding to the pressure on the greenback was softer-than-expected inflation data in May, fueling speculation that the Fed could begin cutting interest rates as early as September. Elsewhere, the yuan gained additional strength from the conclusion of a two-day round of US-China trade talks in London. The discussions resulted in a framework agreement focused on implementing the Geneva consensus and advancing commitments made during a recent presidential phone call. In China, market attention is shifting to a set of key economic indicators due next week, including data on industrial production, retail sales, and the unemployment rate.

Offshore Yuan Ends 2-Session Decline

The Australian dollar depreciated past $0.649 on Thursday, extending its decline from the previous session as risk sentiment soured amid fresh tariff threats from US President Donald Trump. On Wednesday, he announced plans to dispatch official letters to major trading partners within the next one to two weeks, outlining unilateral tariffs aimed at compelling countries to negotiate trade deals. Adding pressure on the Aussie dollar were rising expectations of further interest rate cuts by the Reserve Bank of Australia. Markets price in an 80% chance of a 25 bps cut to 3.60% at the July 8 meeting, with further reductions to 3.10% expected by year-end. However, Westpac Chief Economist Luci Ellis expects the RBA to hold rates in July, followed by quarter-point cuts in August and November, with two additional reductions in February and May next year. Earlier rate cuts are possible if inflation and labour market conditions weaken, potentially bringing the cash rate down to 2.85%.

Australian Dollar Extends Decline

The South Korean won appreciated to around 1,360 per dollar on Thursday, breaking a two-day slide as the new president's proposed market reforms boosted demand for local assets. On June 11, President Lee Jae-myung proposed cutting taxes on dividend income and improving corporate governance to raise shareholder value and address the "Korea Discount." Investors welcomed the measures, though concerns linger over long-term impacts on corporate finances. Meanwhile, Bank of Korea Governor Rhee Chang-yong warned that excessive monetary easing could reignite property price bubbles and fuel exchange rate volatility. The central bank had recently cut its key interest rate to 2.5% on May 29 but signaled caution about further reductions. The policy mix of fiscal stimulus and a dovish monetary stance has increased investor focus on economic stability and market risks.

South Korean Won Rises on Market Reforms

The New Zealand dollar slipped to around $0.601 on Thursday, marking a second consecutive session of decline, as losses in equity markets dampened risk sentiment, holding the currency back from advancing on a broadly weaker US dollar. Contributing to the cautious mood were comments from President Trump, who said on that he will inform trading partners on tariff rates within two weeks, ahead of a July 9 deadline to reimpose higher duties on dozens of countries. However, the Kiwi’s downside may be cushioned following news that the US and China have reached a deal to restore a fragile trade truce during talks in London. This development is particularly significant for New Zealand, given that China is its largest trading partner. Domestically, the currency also found support from expectations that the Reserve Bank of New Zealand is nearing the end of its rate-cutting cycle. Markets are currently pricing in a hold at the July meeting, with a possibility of one final rate cut in August.

New Zealand Dollar Extend Losses

The Japanese yen appreciated to around 144 per dollar on Thursday, extending gains from the previous session as renewed tariff threats from US President Donald Trump boosted demand for safe-haven assets. Trump announced plans to send letters to key trading partners within the next one to two weeks, detailing unilateral tariffs aimed at pressuring countries into trade agreements. In Japan, fresh data showed a further deterioration in business sentiment during the second quarter, as uncertainty surrounding US trade policy weighed on the country’s export-driven economy. Meanwhile, Bank of Japan Governor Kazuo Ueda told parliament on Tuesday that the central bank is prepared to raise interest rates again if there is sufficient confidence that underlying inflation is approaching or stabilizing near the 2% target.

Japanese Yen Rises on Renewed Tariff Concerns

The dollar index weakened below 98.5 on Thursday, approaching its lowest levels since early 2022, following renewed tariff threats from President Donald Trump. Trump announced plans to send formal letters to key trading partners within the next one to two weeks, outlining unilateral tariffs intended to pressure countries into trade agreements. Despite the tough rhetoric, US Treasury Secretary Scott Bessent signaled a potential extension of the current 90-day pause on reciprocal tariffs for countries showing “good faith” in ongoing trade talks. The dollar has faced sustained selling pressure this year as trade policy uncertainty continues to erode investor confidence in US assets. Additional downward momentum came from a softer-than-expected CPI reading for May, which raised market expectations for a potential Federal Reserve rate cut as soon as September. All eyes are now on Thursday’s PPI release for further clues on the inflation outlook and monetary policy trajectory.

Dollar Weakens on Trump's Tariff Pledge

DXY decreased to a 7-week low of 98.35. Over the past 4 weeks, Dollar Index lost 2.62%, and in the last 12 months, it decreased 6.54%.

Dollar Index Hits 7-week Low

The Mexican peso rallied past 19.10 per USD, its strongest level in nearly ten months, amid a softer dollar, easing trade tensions and attractive domestic real yields propelled the currency higher. May’s US CPI rose just 2.4% year-on-year, below expectations, knocking US Treasury yields lower and eroding the greenback’s carry appeal. Simultaneously, reports that Washington and Mexico are close to rolling back Trump’s 50% steel tariffs, subject to volume limits, and that US–China negotiators in London have pledged to revive the Geneva framework and lift rare-earth export curbs have removed key trade uncertainties and alleviated supply-chain bottlenecks. At home, Banxico’s determination to keep policy restrictive, reinforced by headline inflation jumping to 4.42% and core inflation to 4.06%, its highest in eleven years, has preserved an attractive real rate, drawing in capital and underpinning the peso’s advance.

Mexican Peso Near 10-Month Highs

The South African rand traded around 17.3 per USD, holding near its strongest level since December, supported by a softer dollar and rising precious metal prices, particularly platinum and gold. The currency also found strength from positive fiscal developments and optimism over improved ties with the United States. South Africa’s National Assembly approved the Treasury’s fiscal framework, with backing from the two largest political parties—the African National Congress (ANC) and the Democratic Alliance (DA)—bringing the annual budget closer to adoption after extended debate over tax increases. Meanwhile, President Cyril Ramaphosa and US President Donald Trump are set to meet for the second time at the G7 Summit in Canada from June 15 to 17, with discussions expected to focus on AGOA and US-South Africa tariffs, following South Africa’s revised trade and investment proposal.

South African Rand Hovers Around 6-Month High

The Brazilian real strengthened past 5.54 per USD in June, its strongest level in eight months, driven by a softer US dollar, clearer domestic fiscal roadmaps and easing global trade strains. Cooler-than-expected US inflation, May’s CPI rose just 2.4% year-on-year, has brought forward Fed rate-cut bets and pushed US Treasury yields lower, denting the dollar’s carry advantage. At home, Finance Minister Fernando Haddad’s agreement to “recalibrate” the IOF increase, part of a wider package that also tightens tax breaks on formerly exempt investments, has lifted a potential drag on bank earnings and underscored Brazil’s commitment to fiscal discipline. Meanwhile, reports that US–China negotiators in London vowed to revive the Geneva framework and lift rare-earth export curbs have alleviated supply-chain concerns and sharpened demand forecasts for Brazil’s commodity exporters.

Brazilian Real Strengthens to 8-Month High

The British pound rose to $1.353, nearing a three-year high, as the US dollar weakened after softer-than-expected US inflation data for May. The data eased concerns that recent tariffs had significantly impacted prices, reducing pressure on the Fed to hike rates. In the UK, Chancellor Rachel Reeves delivered a multi-year spending review outlining £2 trillion in public expenditures, with annual departmental budget increases of 2.3% in real terms. While this signals support for key sectors, analysts noted the plan confirmed limited fiscal space, increasing the likelihood of tax hikes later in the year. The pound also benefited from expectations that the Bank of England will keep interest rates steady next week, despite mixed economic signals such as slowing wage growth and rising unemployment. At the same time, global risk sentiment improved as the US and China reached a preliminary trade deal in London.

Sterling Climbs Toward 3-Year High

The euro consolidated gains above the $1.14 mark, nearing the three-year highs last seen in April, as investors weighed the increasingly divergent policy outlooks of the European Central Bank and the US Federal Reserve. Recent remarks from ECB officials have strengthened expectations that the central bank may soon pause its easing cycle, adopting a wait-and-see approach to assess the economic impact of new US tariffs. In May, Eurozone inflation eased to 1.9%, while the ECB delivered its eighth consecutive rate cut, bringing the deposit facility rate down to 2%. Meanwhile, the bloc’s economy showed resilience, expanding by 0.6% in Q1, the strongest pace of growth since Q3 2022. In contrast, softer-than-expected US inflation data weighed on the dollar, fueling speculation that the Fed may begin cutting rates as early as September. However, uncertainty persists, as inflation and the labor market remain relatively resilient, while growth headwinds from tariffs continue to build.

Euro Rises as ECB Signals Pause; Fed Faces Growing Rate Cut Bets

The US Dollar Index fell to 98.7, approaching a three-year low of 98.0 last seen in April, after weaker-than-expected inflation data tempered market sentiment. US consumer prices rose 2.4% year-over-year in May, up slightly from 2.3% in April but below the consensus forecast of 2.5%. Energy prices fell 3.5% over the past year, while food prices climbed 2.9%. Core inflation—which excludes food and energy—remained unchanged at 2.8%, just shy of the 2.9% estimate. In response, traders are increasingly pricing in a 25 basis-point rate cut by the Federal Reserve in September, with the likelihood of an additional cut in December rising. Separately, President Trump announced that a trade agreement with China has been finalized following talks in London, though the deal still awaits formal approval.

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