Data showed economic growth in Singapore was its lowest in nearly a decade in the first quarter, while in Thailand it was at its lowest in four years, raising worries that major Asian economies will be hurt by global trade tensions.
“Global growth prospects seem to be getting gloomier by the day,” wrote Hans Redeker, global head of foreign exchange strategy at Morgan Stanley. He also cited a decline in South Korea’s exports in the first 20 days of May, a fall in steel prices and the weakest Japanese condominium sales since 2016.
“The situation in Asia is difficult - Thailand, Singapore, export decline in Korea - which shows that the trade conflict is hurting even without a further escalation,” said Commerzbank foreign exchange strategist Esther Maria Reichelt.
“This is the main cause behind the dollar strength. If anything, I was little bit surprised we didn’t see a more pronounced risk movement,” she added.
The United States temporarily eased trade restrictions on China’s Huawei to minimize disruption for its customers, a move which boosted Asian equities and helped the offshore Chinese yuan pull back from its weakest levels since November, where it has hovered since Friday. But the relief is not expected to be lasting.
“Asian equity markets reacted positively to the news, but there should only be limited follow-through, as uncertainty remains high, and this uncertainty may potentially prompt companies to cut back on existing capex plans,” said Redeker.
The dollar index which measures the currency against a basket of six rivals, was 0.14% higher, last at 98.07.
Against the euro, the U.S. dollar was 0.2% stronger, last at $1.115. The single currency is being hurt by dollar strength and also by upcoming European parliamentary elections in which euroskeptic parties may fare well.
The greenback may have also been lifted by a fall in Treasury bond prices, which saw the 10-year yield rise to a one-week high of 2.435% on the back of some positive comments on the U.S. economy from policymakers.
Elsewhere, Australia’s top policymaker Philip Lowe said on Tuesday the Reserve Bank of Australia would consider the case for lower interest rates at its June policy meeting, pushing the Aussie dollar 0.54% lower to $0.687.