Stronger USD Ahead of Payrolls Report as Investors Favor US Growth

The US dollar has strengthened ahead of the nonfarm payrolls report, with investors favoring US growth and yield. The DXY index briefly climbed to its highest level since May 2025, reaching 102.00. Despite softer inflation data this week, inflation remains above the 2% target, and incoming activity indicators point to a resilient US economy.

Initial jobless claims fell to 197k in September, while construction spending rose 0.9% month-over-month in August. Elevated Treasury yields have sustained broad USD demand, causing most Asia FX currencies to weaken against the dollar despite generally constructive regional data.

The ISM manufacturing index eased slightly to 54.5 in September from 54.6 previously, but remains comfortably in expansion territory. The prices-paid component jumped to 77.9 from 71.1, indicating firm upstream inflation pressures.

Asia's economic releases were broadly constructive, with Japan's Tankan survey consistent with a supportive corporate backdrop and steady investment intentions. South Korea's exports rose 83.5% year-over-year in September, beating expectations of 62.5%. Manufacturing PMIs remained in expansion territory across Korea (53.9), Japan (54.1), and Vietnam (51.9).