The South Korean won was the biggest loser among major Asia-Pacific currencies: the USD/KRW pair rose 0.54% to 1,415.05. Main bearish catalysts for the won include a stronger dollar (the dollar index rose to 99.72) and Brent crude rising to $84 a barrel. South Korea’s heavy dependence on energy imports makes its currency especially vulnerable to concerns about supply disruptions amid uncertainty over ship movements through the Strait of Hormuz.
The Japanese yen also gave back some of the gains achieved after the first joint intervention by the US and Japan since 1998. The authorities’ action propped up the yen’s rate and lifted it from a 40-year low near 164 to 155. However, after the intervention, the USD/JPY pair climbed back 0.30% to 158.27. The pullback highlights the limited impact of one-off interventions given the persistent interest-rate gap between the US and Japan and Tokyo’s challenging fiscal outlook.
Investors are closely watching US macroeconomic data ahead of the FOMC policy meeting. Dismal US nonfarm payrolls for July trimmed expectations of a Fed rate hike in September from 67% to 44%. The next market test will be the US consumer price index (CPI), where core annual inflation is projected to slow to 2.5%, a figure that will set the direction for Asian currencies, including the Australian dollar and the yuan.