Asia FX Slips, Dollar Steady as Markets Eye Tariffs, Fed Decision

Most Asian currencies weakened on Tuesday, while the U.S. dollar held steady as investors braced for key developments on U.S.-China trade tensions and a Federal Reserve policy decision.

Market activity was muted with Japan and South Korea closed for holidays. Chinese markets reopened post-Labor Day, with the yuan jumping to a six-week high amid fresh hopes for trade dialogue with Washington.

The yuan firmed sharply, with the USDCNY pair falling 0.6% to 7.2302, its strongest since late March. Gains came despite soft April services data, as Beijing signaled willingness to consider U.S. trade proposals. President Trump reiterated China "badly needs" a deal, while Treasury Secretary Scott Bessent voiced optimism over talks.

Elsewhere, the Taiwan dollar slumped, with the USDTWD pair up 3.7%, extending a slide to two-year lows. The Japanese yen and South Korean won saw mild declines. The Indian rupee dipped 0.1%, and the Singapore dollar lost 0.4%. The Australian dollar gave back 0.2% after recent gains.

The dollar index was flat in Asian trade, stabilizing after a brief rebound. However, the greenback remains under pressure, weighed down by weak economic data and fading optimism over U.S. growth.

All eyes are on Wednesday’s Fed decision. The central bank is widely expected to hold rates steady, but markets will scrutinize comments from Chair Jerome Powell, who faces renewed pressure from Trump to cut rates.