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Attention on US-Iran is set to give way to Trump’s visit to China this week. As we expected, RMB has appreciated steadily into his visit, with USD/CNH having eased to 6.79 this week and marking a three-year low. Trump’s visit could coincide with a slew of deals for US companies, with US business leaders from banking, payments, asset management, and auto industries also in attendance. But above all, the Trump-Xi summit signals an intent to ratchet lower trade tensions, reducing fears of escalatory tariffs that dominated in the early part of Trump’s term. This should underpin a positive backdrop for Asian currencies going into the second half of 2026.
US Treasury Secretary Bessent’s visit to Japan did not produce anything unexpected, with Bessent expressing his understanding of Japan’s FX market interventions. Bessent has not shied from exerting his influence on Japanese markets at various times, such as initiating a rate check on the USD/JPY market, or warning the BOJ about falling behind the curve on inflation. With him now expressing agreement with Japan’s position that FX volatility is undesirable, Japanese authorities could have lesser concerns about stepping into markets to support the JPY when necessary. USD/JPY has crept above mid-157 again and is approaching the level that has previously triggered a wave of USD/JPY selling consistent with intervention.
USD/KRW is bumping towards 1500 after semiconductor stocks fell overnight, alongside news that a leading Korean chipmaker faces risks of a strike, following the breakdown of bonus talks with the labour union. Korea’s presidential policy chief Kim has also floated the possibility of paying citizens a “dividend” from AI profits this week. While details are unclear, such proposals are not viewed favourably by foreign investors, and could risk outflows and pressure the KRW if enacted.
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