Asia FX retreats on renewed concerns about tariffs; BoK reduces rates as anticipated.

Investors were cautious on Tuesday as a result of President Donald Trump’s reaffirmation of his plans to impose tariffs on Mexico and Canada, and the Bank of Korea cut interest rates as expected. Hours after hitting a two-month low in the precious session, the US Dollar Index fell 1% in Asia. The Dollar Index Futures fell slightly. BoK cuts rate by 25 bps as expected, won slightly lower
In response to mounting economic challenges, the Bank of Korea lowered the benchmark interest rate by 25 basis points to 2.75 percent. The goal was to boost domestic demand. This is the third rate cut since October 2024, and it is in line with market expectations. In response to concerns regarding the sluggish economic performance, the BoK lowered its annual growth forecast for 2025 to 1.5%. The South Korean won weakened slightly against the U.S. dollar, with the USD/KRW pair inching 0.2% higher to 1,430.78 won. On Monday, the pair had dropped to 1423.97 won. Despite the recent appreciation in the last two months, won’s performance remains influenced by external factors, including ongoing U.S. tariff disputes and global trade protectionism. To support economic expansion, the BOK has taken a more accommodative monetary policy stance in response to these difficulties. By the end of the year, analysts anticipate that the BOK may implement additional rate cuts to combat these challenges, even as the United States It is expected that the Federal Reserve will make fewer adjustments. Trump’s renewed tariff threats encourage caution. President Donald Trump’s reaffirmation of imposing 25% tariffs on imports from Mexico and Canada has introduced a wave of renewed uncertainty in global markets. The announcement on Monday has prompted a slight rebound in the U.S. dollar in early trade, which had hit a two-month low in the previous session.
The tariffs, set to take effect on March 4, are anticipated to disrupt North American supply chains, potentially leading to increased production costs and reduced demand for Asian exports.
The USD/INR pair of the Indian rupee increased by 0.3%, while the USD/IDR pair of the Indonesian rupiah increased by 0.4%. The offshore pair USD/CNH for the Chinese yuan remained largely unchanged, while USD/SGD for the Singapore dollar edged slightly higher. The Australian dollar’s AUD/USD pair was also muted.
Bucking the regional trend, the Japanese yen’s USD/JPY pair edged 0.2% lower due to its safe-haven appeal.