Dollar hits 2025 high ahead of payrolls report

The US dollar reached its highest level since May 2025, hitting around 102, as investors awaited the release of the nonfarm payrolls report. The dollar's strength reflects ongoing confidence in US economic growth and higher yields, despite recent softer inflation data. Initial jobless claims dropped to 197,000, and the ISM manufacturing index remained in expansion territory at 54.5, with a notable jump in the prices-paid component to near 78, signaling persistent inflation pressures.

While Asian economies showed strong fundamentals, their currencies weakened against the dollar. South Korea's exports surged 84% year-over-year in September, surpassing expectations, and manufacturing PMIs stayed in expansion in South Korea, Japan, and Vietnam. However, the payrolls report is expected to determine whether these positive regional data points translate into currency gains. A softer-than-expected print could lower US yields and support tech-linked currencies like the South Korean won and Taiwan dollar.

The payrolls report is critical for both the dollar and Asian currencies. A firm number would reinforce expectations of tighter US policy, keeping yields and the dollar elevated. Meanwhile, elevated oil prices and a stronger dollar are tightening financial conditions across Asia, making external factors the dominant influence on regional currencies in the near term.