Asian Currencies Climb as U.S. Dollar Dips on Economic Weakness

Dollar Weakens on Soft U.S. Data and Tariff Disruption

In early May 2025, the U.S. dollar is facing downward pressure following a string of soft economic indicators and evolving trade dynamics. A key factor driving this movement is the 0.3% contraction in U.S. GDP during the first quarter—its first decline in three years. This unexpected slowdown has led investors to revise expectations for the Federal Reserve’s monetary policy, with growing sentiment that rate cuts may occur later this year.

Adding to the dollar’s struggles is President Biden’s “Liberation Day” tariff initiative. While initially triggering a surge in market uncertainty, the administration later issued a 90-day exemption for most nations—excluding China—offering a temporary reprieve for global trade. However, the broader implications of these tariffs, especially on supply chains and input costs, continue to weigh on investor confidence and the greenback’s outlook. (source)

As a result, the dollar index has softened against major peers, opening the door for gains in other currencies, particularly those in Asia, where economic fundamentals appear relatively insulated from current U.S. policy shocks.

Asian Currencies and the Euro See Renewed Bullish Momentum

A recent Reuters survey reveals growing bullish sentiment toward a number of Asian currencies, including the Singapore dollar, Indian rupee, Thai baht, and Philippine peso. These currencies have gained traction thanks to a weaker U.S. dollar and relatively stable macroeconomic conditions in their respective countries. The South Korean won, Taiwanese dollar, and Malaysian ringgit have also seen their first bullish shift since October 2024.

The Philippine peso, in particular, reached its strongest long position since September, driven by increased foreign investment and a favorable balance of trade compared to regional peers. Although sentiment remains cautious on the Chinese yuan and Indonesian rupiah due to regulatory uncertainties and tariff risks, analysts suggest that these currencies could rebound if risk appetite improves. (source)

In Europe, the euro has shown signs of resilience, supported by a better-than-expected Eurozone GDP report. The British pound is also in focus as traders anticipate upcoming UK GDP and labor market data, which could influence the Bank of England’s next move. Many expect a 25 basis point interest rate cut in the coming weeks, which may create some short-term softness for the pound. (source)

Looking ahead, market participants are watching several key events that could move forex markets, including the U.S. nonfarm payroll report, the Federal Reserve’s interest rate decision, and central bank announcements from the UK and Australia. With trade policy and inflation dynamics still in flux, the foreign exchange landscape is expected to remain highly reactive throughout May.