USD index

Thursday, Asian session. Traders in Tokyo, Seoul, Singapore, and Shanghai are staring at their screens, but the markets are frozen in a strange state of suspense. Most Asian currencies are trading in narrow ranges, as if lying low before a sudden move. The U.S. dollar, by contrast, feels confident, remaining near 13-month highs. The USD index has stabilized at 101.39, and this figure is weighing on all regional currencies without exception.

The reason for this lull is anticipation. Everyone is waiting for key U.S. labor market data, which is due to be released later on Thursday. The June nonfarm payrolls figures may become the trigger that either confirms the resilience of the American economy or forces markets to question the Federal Reserve’s hawkish intentions.

But until the data is released, markets remain tense. Investors do not want to open large positions before the statistics are published, because any deviation from forecasts could trigger a sharp move. In such a situation, Asian currencies become hostage to external factors: they are too weak to resist the dollar and too dependent on global risk appetite to move independently.

The situation of the Japanese yen, which is hovering near 40-year lows, and the South Korean won, which is at a 17-year bottom, is especially telling. Even the Indian rupee, which received some support from falling oil prices, cannot boast confident growth. Asian currencies are trapped between the hammer of the Fed and the anvil of their own economic problems. And for now, there is no visible way out of this trap.

Let’s examine what lies behind this pressure, why the dollar continues to dominate, and what U.S. labor market data could change.