- The escalation in the Middle East and rising U.S. Treasury yields have pushed the Dollar Index (DXY) up to 101.16, putting pressure on major Asian currencies this Monday.
- Japan's Finance Minister, Katayama Satsuki, hinted at encouraging the world's largest pension fund, GPIF, to increase domestic asset allocation, sparking market expectations of a structural shift in the long-pressured yen.
- South Korea's semiconductor sector faced heavy foreign selling, causing the Korea Composite Stock Price Index (KOSPI) to plummet and trigger a circuit breaker, dragging the Korean won to break the 1507 level against the dollar (USD/KRW).
Geopolitical Risks Stimulate Dollar Buying
The escalation in the Middle East has heightened global energy supply chain risks, with renewed concerns over the blockade of the Strait of Hormuz, further intensifying global inflation expectations. Traders are positioning ahead of Federal Reserve Chairman Kevin Walsh's congressional testimony and the release of the U.S. June Consumer Price Index. The U.S. 10-year Treasury yield (US10YT=X) edged higher, pushing the Dollar Index up by about 0.2% to 101.16. With recent rate cut expectations suppressed, safe-haven funds are concentrating on dollar assets, putting pressure on non-U.S. currencies.
Pension Policy Expectations Support Yen
The yen rebounded 0.4% against the dollar (USD/JPY) to around 162.3, as the market continues to digest the Japanese Finance Minister's remarks on guiding the government pension investment fund to increase domestic financial asset investments. Analysts point out that if this world's largest institutional investor initiates asset rebalancing, shifting some overseas holdings back to Japan, it could create a potential demand for foreign exchange purchases of 12 trillion to 30 trillion yen. If this structural policy direction is established, it could become a significant policy turning point in the yen's year-long depreciation trend.
Korean Stocks Trigger Circuit Breaker, Won Under Pressure
Due to the outflow of funds from the global AI and semiconductor sectors, foreign investors have increased their selling of South Korean tech giants like Samsung Electronics and SK Hynix. The Korea Composite Stock Price Index's intraday decline exceeded 8%, triggering a rare circuit breaker. The capital outflow from semiconductor stocks directly dragged the won lower, with the dollar rising 0.6% against the won to around 1507. The valuation adjustment in the tech sector and capital outflows are mutually reinforcing, exacerbating short-term volatility in emerging market currencies.
Regional Currencies Await Key Data
In other Asian markets, the Australian dollar also weakened against the U.S. dollar, while the Chinese yuan (USD/CNY) remained relatively stable under the central bank's guidance. Investors are currently in a wait-and-see mode, anticipating the release of China's June trade data, second-quarter GDP, and retail sales figures this week. Additionally, the Bank of Korea is set to announce its interest rate decision, and Singapore will release preliminary second-quarter economic data. Cross-border capital flows in Asia will remain highly dependent on marginal policy changes in major economies.
