Asia Hit by Dollar: Yen and Ringgit Slump, While Won and Rupiah Strengthen
Many Asian currencies were under pressure this week amidst a surge in the US Dollar. In the final trading session of the week on Friday (2/10/2026), the Rupiah exchange rate managed to reverse course and closed at Rp17,868/US$.
This weekend strengthening allowed the Rupiah to record a positive weekly performance. According to Refinitiv data, the Indonesian currency edged up by 0.07% throughout the week.
The Rupiah’s performance was relatively better than most other Asian currencies. This is because the US Dollar is currently in a strong strengthening trend, supported by high US government bond yields and expectations that Federal Reserve interest rates will remain high.
Majority of Asian Currencies Weaken
US Dollar pressure was quite palpable across the Asian region throughout the week. According to Refinitiv data, out of 10 monitored Asian currencies, seven weakened against the US Dollar. Only the South Korean Won, Chinese Yuan, and Indonesian Rupiah managed to record gains.
The South Korean Won was the strongest performer, gaining 0.82% during the week to reach KRW1,342.53/US$. The Chinese Yuan followed with a 0.12% increase, while the Rupiah rose slightly by 0.07%.
On the other hand, the Thai Baht faced the deepest pressure with a 0.45% decline. The Japanese Yen fell by 0.36%, followed by the Taiwan Dollar which corrected by 0.30%, and the Malaysian Ringgit by 0.27%. The Philippine Peso weakened by 0.15%, the Singapore Dollar fell by 0.13%, while the Vietnamese Dong corrected slightly by 0.04%.
The pressure on most Asian currencies is inseparable from the strength of the US Dollar throughout the week. The US Dollar Index (DXY) was recorded to have strengthened by 0.95% weekly to the 101.932 level. This strengthening means the US Dollar has booked gains for three consecutive weeks.
One of the drivers is the still very high US government bond yields. The 10-year US Treasury yield on Friday was around 5.19%, not far from its highest level in decades. These high yields make US assets remain attractive to investors and maintain demand for the Dollar.
Pressure also came from the European bond market. Concerns regarding the fiscal and political conditions of several countries, particularly France and Italy, prompted government bond selling in the region, making the Dollar relatively more attractive. High oil prices also served as another factor. Countries that are heavy energy importers face greater pressure as rising oil costs can worsen trade balances and increase inflation, a condition that also burdened several currencies, including the Japanese Yen.
US Labour Data Slightly Dampens Dollar
The US Dollar actually lost some momentum during Friday’s trading after US labour reports showed weaker-than-expected results. US job growth in September was below economist forecasts, while the unemployment rate rose slightly to 4.2%.
This data slightly eased concerns that the Fed might need to raise interest rates again in the near future. “Looking at the overall labour data, I think the figures are quite appropriate. Economic activity remains sufficiently strong, but it has not yet triggered significant inflationary pressure,” said Dominic Bunning, Head of G10 Currency Strategy at Nomura, as quoted by Reuters.
According to Bunning, the condition is still quite good for the economy because the labour market has not shown a sharp weakening, but is also not too hot to trigger new price pressures. Markets have also begun to reduce expectations for a Fed rate hike in October. Based on CME FedWatch, market participants now estimate an 86% probability that the Fed will maintain interest rates at this month’s meeting, significantly higher than the 36% recorded the previous week.
However, this change in expectations has not been enough to erase the US Dollar’s strengthening that occurred throughout the week. High US government bond yields and concerns regarding the fiscal conditions in several European countries continue to support the US Dollar. High oil prices also support the US Dollar. The rise in energy prices causes investors to reduce holdings in currencies of countries heavily dependent on energy imports, including the Euro and the Yen.
The Euro is on a weakening path against the US Dollar for the fourth consecutive week, the longest period of decline since May 2025. Meanwhile, the US Dollar is also on a strengthening path against the Yen for three consecutive weeks.
Pressure in Europe is increasing due to concerns over the fiscal conditions of France and Italy. The 10-year French government bond yield even spiked to its highest level since 2002. The yield spread between French and German government bonds widened to more than 150 basis points, the largest since the end of 2011. The combination of high US bond yields, expensive oil prices, and fiscal concerns in Europe ensures the US Dollar remains attractive to market participants.