Asian FX rallies as USD weakens on recession fears, tariff uncertainty

USD remains offered across the board as investor flows shift sharply into Asia, following a record 6% two-day surge in the Taiwan dollar (TWD) and strong gains in the Korean won (KRW), Chinese yuan, and Thai baht (THB). Markets are reassessing US asset exposure amid weakening U.S. growth and erratic trade policies, with the greenback under sustained pressure.

Asian selling continues, amplified by speculation that Taiwan and other regional economies may be allowing currency appreciation to ease trade tensions with Washington. The Singapore dollar (SGD) and Malaysian ringgit (MYR) have also firmed as capital pours into the region, defying the historical trend of FX depreciation as a shock absorber in trade disputes.

Nil news on tariffs, aside from the latest US levies targeting foreign filmmakers. However, the broader trade war rhetoric lingers, with analysts noting that Asia's tolerance for currency strength may be shifting amid changing trade dynamics and rising intra-Asian commerce.

FOMC due Wednesday, with markets watching for signals of rate cuts later this year. Bank of England meets Thursday, likely to stay on hold, but the focus will be on forward guidance as the global central bank divergence narrative deepens.