News

By Ankur Banerjee

TOKYO (Reuters) -The U.S. dollar weakened on Thursday in tandem with a surge in the South Korean won amid persistent speculation that Washington is seeking a weaker greenback, which in turn also lifted other Asian currencies.

News on Wednesday that officials from South Korea and the U.S. met last week to discuss the dollar/won exchange rate has led to a bout of dollar selling, underscoring a cautious mood in the market after initial euphoria over a U.S.-China tariff truce early this week fizzled out.

The won gained for a second straight day, up 0.8% at 1,396.22 per dollar after a 0.6% rise in the previous session. It is up nearly 6% this year after being the worst performer among emerging Asian currencies last year, when it dropped 14% against the dollar.

"Reports of currency discussions between the U.S. and South Korea, coupled with signs the Trump administration may tolerate a weaker dollar, have fuelled won sentiment," said Kieran Williams, head of Asia FX at InTouch Capital Markets.

The sudden lurch in the won was reminiscent of an unprecedented two-day surge in Taiwan's currency at the start of May, which also coincided with the end of U.S.-Taiwan trade talks in Washington.

The Taiwan dollar was 0.5% stronger to the dollar in afternoon trading on Thursday and is up 8% this year.

The Japanese yen strengthened 0.5% to 146.04 per dollar after having touched a one-month low of 148.65 touched earlier this week.

The dollar index, which measures the U.S. unit against six other currencies, was 0.13% lower at 100.87, but on course to eke out a 0.5% gain for the week. Even so, the index is down nearly 7% in 2025.

U.S. President Donald Trump's aggressive and erratic trade policies have rattled investors' confidence in the dollar, leading to a sharp fall in U.S. assets. While stock markets have recouped April losses, the dollar remains under pressure.

A Bloomberg report on Wednesday, however, said the U.S. is not negotiating for a weaker dollar as part of tariff talks, which has helped calm some of the nervousness in the markets.

AWAITING DATA

A major market focus on Thursday will be U.S. retail sales data, and investors are also going to be looking out for more details on possible trade deals after the U.S.-China tariff truce.

The two countries on Monday announced a 90-day pause on most of the tariffs imposed on each other's goods since early April, leading to a brief relief rally for the greenback.

"We consider there is more upside to the dollar in the near term as market participants reassess the outlook for the U.S. and global economies following the temporary U.S.‑China trade deal," said Kristina Clifton, an economist at the Commonwealth Bank of Australia.

U.S. Treasury yields were elevated and the benchmark 10-year yield rose to a one-month top, in part due to worries over Trump's budget package that would add trillions of dollars to the U.S. debt.

ING economists expect the dollar recovery to be limited due to U.S. tariff policy scares last month as well as the latent fear of another 'sell America' moment emerging this summer as unfunded tax cuts proceed through Congress.

"The scars of April’s events will likely be left on both the US economy and the dollar," they said in a note.

Down Under, the Australian dollar swung higher again after a surprisingly strong reading on employment added to the case against rapid-fire rate cuts in coming months, though an easing is still widely expected next week.

The Aussie was 0.22% higher at $0.64425, while the New Zealand dollar rose 0.17% at $0.5908.