Market Overview

On 24 September 2026, Asian currency markets displayed mixed movements while the U.S. dollar remained near a two‑month high. The dollar index was around 101.09 after briefly touching 101.2 earlier in the session.

Drivers of Dollar Strength

The rally was underpinned by a stronger‑than‑expected U.S. manufacturing report that revived inflation concerns, and a poorly received $70 billion five‑year Treasury auction that triggered bond‑market selling, pushing the five‑year yield above 5% for the first time since 2007. Fed Governor Michael Barr warned that a strong economy and rising inflation risks could necessitate further rate hikes, leading CME FedWatch pricing to imply an almost 70% probability of an October rate increase, up from about 50% a week earlier.

Currency Movements

  • Japanese Yen: The USD/JPY pair slipped 0.2% to 157.94, keeping the yen near its weakest level in three weeks. Japan’s 10‑year government bond yield rose to roughly 3.06%, the highest in three decades, after the market reopened following a holiday. Despite the yield jump, the yen remained under pressure, with markets judging the Bank of Japan’s recent rate hike to a 31‑year high as insufficiently hawkish. The flash manufacturing PMI for Japan fell to 54.1 in September from 54.9 in August.
  • South Korean Won: The won weakened, with USD/KRW up 0.5% to 1,372.1, as South Korean stock markets were closed for the Chuseok holiday.
  • Indonesian Rupiah: The rupiah depreciated, with USD/IDR rising 0.6% to 17,903.5. Bank Indonesia kept its benchmark rate unchanged at 5.75% and reiterated its use of exchange‑rate stabilization measures and incentives for foreign inflows.
  • Indian Rupee: The rupee edged firmer, with USD/INR down 0.02% to 95.915. The Reserve Bank of India continued draining surplus banking liquidity through bond sales and foreign‑exchange swaps to limit inflationary pressure from excess cash.
  • Chinese Yuan: The offshore yuan (USD/CNH) rose 0.1% to 6.72 and the onshore yuan (USD/CNY) to 6.71, after earlier strengthening through the 6.70 level to a more than 3½‑year high.
  • Australian and New Zealand Dollars: The Australian dollar traded around US$0.70 and the New Zealand dollar around US$0.57, with USD/AUD up 0.1% and USD/SGD marginally higher at 1.2801.

Commodity and Geopolitical Context

Brent crude settled near US$103 a barrel after a near‑4% rise on the previous day, adding to inflation pressure. The price increase followed Iranian President Masoud Pezeshkian’s pledge that Tehran would not surrender, and markets’ assessment of U.S. efforts to restrict diesel exports. Iran also signaled it would not allow freedom of navigation through the Strait of Hormuz amid ongoing U.S. sanctions and a naval blockade, heightening uncertainty around energy supplies.

Upcoming Diplomatic Developments

The yuan’s trajectory is linked to the forthcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping. While the current trade truce is expected to be extended for another two months, negotiations on artificial intelligence, rare‑earth exports, U.S. aircraft purchases, and agricultural goods remain unresolved.

Market Sentiment Indicators

  • U.S. Treasury Futures (FVX) rose 3.20%, reflecting higher five‑year yield expectations.
  • Japanese 10‑year Yield (JP10YT=XX) increased 2.98%.
  • Crude Oil Futures (LCO) fell 0.75% after the settlement price.