The US Dollar (USD) has shown notable strength against a North Asia import-weighted basket, including the Chinese Yuan (CNY), Japanese Yen (JPY), Taiwan Dollar (TWD), and South Korean Won (KRW), rising nearly 4% year-to-date, compared to a 1% gain against the broader dollar index of traditional currencies [1]. This divergence has raised concerns about US inflation, as the US continues to run trade deficits with these North Asian economies, and the misalignment complicates balance-of-payments adjustments. BNY’s Geoff Yu suggests that the US may intensify calls for these currencies to reflect their strong economic fundamentals to avoid a USD valuation overshoot, which could further complicate Federal Reserve monetary policy [1].
The US Dollar Index (DXY) recently retreated from a nearly two-month high, struggling to break above the 99.50 resistance level, but downside risks appear limited due to ongoing geopolitical uncertainties, including tensions in the Middle East and elevated oil prices fueling inflation fears [2]. The DXY remains above key technical support levels, with the Relative Strength Index (RSI) at 61 and a mildly positive MACD, indicating constructive momentum. The USD was the strongest this week against the New Zealand Dollar (NZD), up 1.74%, and also posted gains against the Euro (EUR) by 0.39%, British Pound (GBP) by 0.24%, Japanese Yen (JPY) by 0.32%, Canadian Dollar (CAD) by 0.83%, Australian Dollar (AUD) by 0.50%, and Swiss Franc (CHF) by 1.30% [2].
The Swiss Franc (CHF) edged lower against the USD following softer-than-expected Swiss inflation data, with the USD/CHF pair trading at 0.7910. Swiss CPI grew at 0.6% year-on-year in May, below the expected 0.8%, and 0.2% month-on-month, matching expectations but down from 0.3% previously. This steady inflation supports the Swiss National Bank's (SNB) current 0% interest rate policy [3]. Earlier, the CHF had appreciated as the USD lost ground on news of an Israel-Lebanon ceasefire, but renewed hostilities and US-Iran tensions subsequently boosted demand for the safe-haven USD [3].
GBP/USD has been trading sideways, fluctuating between 1.3407 and 1.3485 over the past four days, as US-Iran negotiations remain deadlocked and the closure of the Strait of Hormuz impacts oil-importing currencies. Investors are awaiting the US Nonfarm Payrolls (NFP) data for May, which could provide further cues for the Federal Reserve's policy outlook. Technical analysis shows GBP/USD holding a near-term bearish bias below the 20-period EMA, with resistance at 1.3456 and support at 1.3408 [4].
The Euro (EUR) continues to face headwinds despite aggressive European Central Bank (ECB) pricing, as real rate dynamics and growth concerns weigh on EUR/USD. BNY’s Geoff Yu notes that tighter ECB policy could quickly shift market expectations toward forward easing if growth weakens, with capped Bund yields and weak services PMIs undermining the Euro. Domestic investors are increasingly hedging overseas investments, contributing to the EUR's underperformance [5].
CONCLUSION
The US Dollar remains resilient, outperforming both North Asian and major currencies amid ongoing geopolitical risks and inflation concerns. Market participants are closely watching upcoming US economic data and central bank policy signals, while misalignments in currency fundamentals and regional growth uncertainties continue to shape FX market dynamics.