Dollar Falls as Asian, European Currencies Rally on Trade and Inflation Shifts

Asian Currencies Outperform as U.S. Dollar Softens

The U.S. dollar is currently under pressure, weakening against several major currencies as global investor sentiment shifts away from the greenback. The primary catalyst behind this movement is a growing skepticism surrounding U.S. trade policy and inflation trajectory. According to a recent Reuters report, the U.S. dollar’s traditional safe-haven appeal has diminished as foreign investors question its long-term stability due to tariffs and slowing economic growth.

In contrast, Asian currencies are gaining traction. A combination of improving diplomatic ties between the U.S. and China and new trade agreements across Southeast Asia has sparked renewed investor confidence in the region. The Taiwanese dollar and the Philippine peso are leading the charge, hitting their strongest levels since 2020. Long positions in the Chinese yuan are also on the rise, signaling growing optimism for the region’s economic stability. This is echoed in a Reuters currency poll that highlights the surge in bullish sentiment toward Asian assets.

Adding to the momentum, India’s central bank, the Reserve Bank of India (RBI), is actively defending its foreign reserves amid escalating global tensions. Over 74% of its balance sheet is now comprised of forex reserves, and the RBI is reviewing its liberalised remittance scheme after FY25 saw nearly $30 billion in outflows. These moves underscore the strategic importance of currency stability in India’s monetary policy.

Euro and Pound Edge Higher as U.S. Data Sparks Uncertainty

European currencies are also performing strongly. The euro has gained ground, with the EUR/USD pair currently testing the 1.1367 level. Analysts suggest that if this pair breaks the resistance at 1.1410, it could advance toward the 1.1475 mark. However, any retreat below 1.1165 might reverse the current bullish trend. Market focus remains on inflation readings and how they might influence future European Central Bank decisions.

Meanwhile, the British pound is holding firm. The GBP/USD pair is hovering near its 1.3445 support zone. If it rebounds successfully, a move toward 1.3685 could be on the horizon. A drop below 1.3365, however, would signal a potential trend reversal.

The Japanese yen is also gaining strength, largely due to concerns over the U.S. tariff impact on Japan’s export-driven economy. Japanese firms reported shipping delays in April, prompting increased demand for the yen as a hedge.

Looking ahead, U.S. economic releases—especially April’s personal income and spending data and the Fed’s preferred inflation metric, the Core PCE Deflator—are expected to shape the dollar’s near-term trajectory.

As global currency dynamics continue to evolve, traders are adjusting their positions accordingly, moving toward regions that offer greater stability and growth prospects.