Asian Currencies Weaken as Dollar Holds Near Two-Month High

Asian currencies weakened on Monday as the US dollar held near a two-month high. The dollar's strength is partly due to solid US economic data and elevated longer-dated Treasury yields, which have reinforced expectations of another Federal Reserve rate hike by the end of October.

The yen slipped 0.3% against the dollar after gaining on Friday following a call between Japan's Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent. Markets are questioning whether the Bank of Japan is moving quickly enough to close the interest-rate gap with other major economies.

The Reserve Bank of Australia is expected to raise its cash rate by 25 basis points to 4.60% on Tuesday, its highest level in almost 15 years. The move would follow three increases this year and comes as Governor Michele Bullock has highlighted the risk that sustained energy-price pressures could feed into inflation.

The standoff between the US and Iran over oil prices continues to support the dollar. Oil prices remain elevated after US President Donald Trump rejected an agreement aimed at resolving the conflict, keeping energy-supply risks high.