Asian Currencies Rise as Dollar Weakens, Treasury Yields Climb

Most Asian currencies strengthened on Friday and headed toward weekly gains as the U.S. dollar remained under pressure, while renewed increases in Treasury yields kept investors cautious about the U.S. fiscal outlook.

The U.S. Dollar Index slipped 0.2% to 98.735 by 03:47 GMT, hovering near a three-month low. The greenback was on course to lose nearly 1% for the week despite the U.S. Treasury’s expanded bond-buyback program.

The Treasury announced Wednesday that it will double planned purchases of longer-dated debt to at least $4 billion per operation from $2 billion beginning in September. However, the move provided only temporary relief to the bond market. The 10-year Treasury yield returned to around 4.70%, while the 30-year yield climbed near 5.25% amid persistent concerns over the U.S. deficit and growing government debt.

In Japan, USD/JPY eased 0.1% to around 159 yen and was headed for a 0.2% weekly decline. Japan’s core consumer inflation accelerated to 1.8% year-on-year in July from 1.6% in June, while inflation excluding fresh food and energy rose to 1.9%.

The data reinforced expectations that the Bank of Japan could raise its policy rate from 1% to 1.25% at its September meeting. Japan’s manufacturing PMI also improved, with new orders expanding at their fastest pace since January 2018.

Elsewhere in Asia, the South Korean won led gains as USD/KRW dropped 0.9% to its lowest level since September 2025 and headed for a 2.5% weekly decline. AUD/USD gained 0.4%, while USD/SGD fell 0.2%. The Chinese yuan was broadly unchanged.

The Indian rupee bucked the regional trend, with USD/INR on track for a 0.3% weekly increase. Rising crude oil prices and importer hedging weighed on the currency despite Reserve Bank of India intervention.

Brent crude traded just below $94 per barrel after gaining more than 6% this week, increasing pressure on oil-importing Asian economies as tensions involving the U.S., Israel and Iran remained elevated.