Asian currencies extended losses on Thursday after a hotter-than-expected U.S. Consumer Price Index report reinforced expectations that the Federal Reserve will keep interest rates higher for longer. The data showed core inflation rising 0.4% month-over-month and 3.3% year-over-year, dashing hopes for an early rate cut and pushing the U.S. dollar index higher. This macro backdrop is weighing on risk-sensitive assets, including cryptocurrencies, as investors flock to the safety of dollar-denominated instruments.
Market attention is now shifting to a potential meeting between former President Donald Trump and Chinese President Xi Jinping, which could set the tone for trade relations and tariff policy. Trump has previously floated a 60% tariff on Chinese imports, a move that would have significant ripple effects across global supply chains and emerging-market currencies. The uncertainty is amplifying risk aversion, creating a challenging environment for crypto markets that often correlate with traditional risk assets.
For cryptocurrency investors, the combination of sticky U.S. inflation and trade policy uncertainty is a double headwind. Higher U.S. rates reduce the appeal of non-yielding assets like Bitcoin, while a stronger dollar can trigger capital outflows from emerging markets and speculative assets. Regional central banks are intervening to smooth volatility, but the broader picture suggests that Asian FX—and by extension risk assets—may remain under pressure until clearer signals emerge from both monetary policy and trade negotiations.
