During today's Asian trading, the US dollar declined against major currencies, while the Japanese yen strengthened following an election in which Japan's ruling coalition lost control of the upper house. While the outcome weakens Prime Minister Shigeru Ishiba's political grip, markets had largely priced in a poor result, limiting volatility, especially with Japanese markets closed for a holiday. Ishiba’s future remains uncertain, and any leadership change could trigger foreign outflows from Japanese assets and delay trade talks with the U.S. ahead of an August 1 tariff deadline. Analysts noted that political instability will likely constrain the Bank of Japan from tightening policy, adding downward pressure on the yen. Meanwhile, Japan’s long-term bond yields hit record highs, reflecting broader market anxiety.
Globally, markets remained cautious ahead of central bank meetings. The Federal Reserve is expected to hold interest rates steady in July despite political pressure from President Trump. Traders are increasingly betting on a rate cut in October. The European Central Bank is also expected to keep rates unchanged, citing tariff uncertainty.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.19% to 98.27
In China, the central bank left key lending rates unchanged after slightly stronger-than-expected second-quarter GDP data. The one-year LPR remains at 3.0%, and the five-year at 3.5%. Despite signs of resilience, weak domestic demand and deepening producer deflation suggest more stimulus may be needed. Markets are now looking to the upcoming Politburo meeting for policy signals.
The New Zealand dollar was almost unchanged against the US dollar, despite the inflation data. New Zealand’s annual inflation rose to 2.7% in Q2 2025, up from 2.5% in Q1, but slightly below the 2.8% forecast by economists. The increase was driven by higher rents, electricity costs, and local government taxes, according to Statistics New Zealand. On a quarterly basis, consumer prices rose 0.5%, less than the expected 0.6%. The Reserve Bank of New Zealand (RBNZ), which recently paused its easing cycle and held the cash rate at 3.25%, had projected 2.6% inflation for the quarter. Economists still anticipate further cuts, with weak domestic demand, soft housing and labor markets, and global uncertainty - especially around U.S. tariffs - likely to weigh on inflation.