Asian Currencies Consolidate as Dollar Holds Near 98 Before NFP

Asian currencies consolidated against the dollar ahead of the US nonfarm payrolls report due today, with the DXY near 98.00 as markets braced for an upside surprise to the +65k consensus.

"NFP risks appear skewed to the upside in our view, which would be USD positive," MUFG analysts wrote in a note. "A sharp hawkish repricing of US rate expectations remains unlikely, which should help contain the extent of any dollar strength following the release."

Initial jobless claims eased to around 203k on average in April from 209k in March, while the ADP report showed a pickup in private sector hiring. The ISM services employment index rose to 48.0 from 45.2 previously. Asian currencies extended gains against the dollar, led by the Philippine peso (+1.5%), as de-escalation hopes in the Middle East and softer Brent prices supported risk appetite.

An upside surprise in payrolls could push the dollar higher and pressure Asian currencies, while a miss would likely reinforce the recent trend of Asian FX strength. Taiwan's export data, due today, will also be closely watched for evidence of sustained AI-driven semiconductor demand after March exports surged 61.8% year over year.

Fresh clashes between three US warships and Iranian forces in the Strait of Hormuz could temper market optimism, MUFG noted. With markets awaiting signs of progress on a potential US-Iran deal and the NFP release due later today, some consolidation in Asian FX is possible.

The dollar index has held firm around 98.00 despite softer spot price action than positioning would suggest. Markets have largely maintained their build-up of net long USD positioning into NFP, though overall positioning does not appear particularly stretched. This suggests traders are not aggressively adding to dollar longs but are also not reducing exposure ahead of the data.

Taiwan Exports in Focus

Taiwan's export data will be closely watched today for evidence of sustained strength in AI-driven semiconductor exports. After a surge of 61.8% year over year in March, April exports may not be as impressive but should remain sufficiently firm to validate the strong performance seen in Taiwan equities. This keeps the TWD outlook constructive, with positive spillovers for tech-linked Asian FX more broadly.

The semiconductor export cycle has been a key driver of regional currency strength this year, with Taiwan and South Korea benefiting from AI infrastructure spending. A continued firm reading would reinforce the narrative that tech demand remains resilient despite broader global growth concerns.

US equities ended mixed on Wednesday, with the Dow Jones Industrial Average rising 0.5% to a record close of 54,349.12 while the S&P 500 slipped 0.17% to 7,723.55 and the Nasdaq fell 0.83% to 26,363.44. SpaceX plunged nearly 14% after reporting a sharp rise in capital expenditures, while Nvidia climbed 3.4% after Elon Musk said the company would rely exclusively on Nvidia chips for its AI infrastructure.

Gold prices rallied to a seven-week high, with 24K gold in Dubai at AED 510.50 per gram, supported by a weaker dollar, lower Treasury yields and easing expectations of further US rate hikes. The precious metal's resilience reflects a market increasingly pricing in a Fed that may be done with tightening, even as labor market data points to continued strength.

The NFP release later today will determine near-term dollar direction. If payrolls surprise to the upside, the dollar could strengthen against Asian currencies, particularly those most sensitive to US rate expectations. Conversely, a weak print would likely extend the recent run of Asian FX gains, with the peso and Taiwan dollar among the best performers.

For the broader macro picture, the labor market data will feed directly into the Federal Reserve's September policy decision. Markets are currently pricing a path that assumes the Fed can hold rates steady, but a strong jobs report could force a reassessment of that outlook.

This article is for informational purposes only and does not constitute investment advice.