Asian Stocks Fall as Dollar Slips on Rate Cut Hopes and Trade Uncertainty

Asian stocks declined on Wednesday as investors reacted to growing uncertainty over U.S. interest rate cuts and global trade negotiations ahead of President Donald Trump’s July 9 tariff deadline. Trump ruled out extending the deadline and expressed doubts about reaching a deal with Japan, while remaining optimistic about India.

The MSCI Asia-Pacific index (excluding Japan) dipped 0.23%, retreating from last week’s high. Japan’s Nikkei dropped 0.78%, pressured by tech losses. Taiwan and South Korea’s Kospi also declined, mirroring weakness in U.S. tech stocks following June’s rally.

U.S. data showed job openings rose in May, signaling a resilient labor market. Investors now await Thursday’s payroll report for more clues on potential Federal Reserve action. Fed Chair Jerome Powell reiterated a cautious approach, saying the central bank will assess the impact of tariffs before cutting rates. Markets are pricing in 64 basis points in rate cuts this year, with just a 21% chance of a move in July.

The dollar continued to weaken, trading near its lowest level since March 2022. The euro held at $1.1793, just below a 3.5-year high, while the yen remained steady at 143.52 per dollar. Currency analysts noted that weak economic data or trade disruptions could further pressure the greenback.

Investors are also closely watching Trump’s $3.3 trillion tax-and-spending bill, which passed the Senate and heads to the House. While bond markets have remained calm, experts warn the legislation could worsen U.S. fiscal health and keep long-term yields elevated.

Safe-haven demand lifted gold prices this year, though spot gold slightly eased to $3,332.19 per ounce after a 1% jump the previous session. Gold remains up 27% year-to-date as investors seek shelter from fiscal and geopolitical uncertainty.