A man walks in front of a stock quotation board showing the Nikkei share average outside a brokerage in Tokyo, Japan, Jul 2, 2025. REUTERS/Kim Kyung-Hoon
Asian stocks slipped on Wednesday and the dollar languished near 3-1/2-year lows as investors weighed the prospect of US interest rate cuts and the scramble for trade deals ahead of President Donald Trump’s Jul 9 deadline for tariffs.
Trump said he was not considering extending the Jul 9 deadline for countries to negotiate trade deals with the United States, and cast doubts again that an agreement could be reached with Japan, although he expects a deal with India.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.23% in early trading, inching away from the November 2021 top it touched last week. Japan’s Nikkei .N225 fell 0.78%, dragged by tech stocks.
Tech-heavy Taiwan stocks .TWII and South Korea’s Kospi Index .KS11 also fell after US tech firms were hit hard following a strong rally in June.
Data on Tuesday showed the U.S labour market remained resilient with a rise in job openings for May, sharpening the focus on the payrolls report due on Thursday as investors try to gauge when the Federal Reserve is likely to cut rates next.
Fed Chair Jerome Powell, under fire from Trump to cut rates immediately, reiterated that the US central bank plans to “wait and learn more” about the impact of tariffs on inflation before lowering interest rates.
Traders are pricing in 64 basis points of cuts this year from the Fed with the odds of a move in July at 21%.
That maintained a bearish bias on the dollar. The euro EUR=EBS last bought $1.1793, just below the three-and-half-year high it touched on Tuesday. The yen JPY=EBS was steady at 143.52 per dollar. FRX/
“Any disappointing economic data can prompt further dovish repricing of FOMC rate cuts and another round of USD selling,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
“The ‘One Big Beautiful Bill’ Act (OBBBA) and trade developments also have the potential to further weaken the USD if they undermine investor confidence about the US economy.”
TRUMP’S BILL
Investor focus over the last few days has pivoted to the progress of Trump’s massive tax-and-spending bill, which is expected to add $3.3 trillion to the national debt. The legislation heads to the House of Representatives for possible final approval after US Senate Republicans passed it by the narrowest of margins.
The bill has stoked fiscal worries but the reaction was relatively muted after it passed the Senate. The benchmark US 10-year yields were steady at 4.245% US10YT=RR having touched a two-month low in the previous session.
Aninda Mitra, head of Asia macro strategy at BNY Investment Institute, said the legislation “hard wires” a steady deterioration of the fiscal position and the debt trajectory of the US government.
“The near-term impact is mostly in the price, but the uncertainty factor could keep term premia elevated. We don’t think long-term yields will fall back materially in the 6-12 month horizon.”
The fiscal worries, trade uncertainties and the US rate path trajectory have all led investors to flee US assets and look for alternatives. Investors worry that Trump’s chaotic trade policies could hit US economic growth.
That has left the dollar unloved, with the greenback down over 10% for the year in its worst first half performance since the 1970s. The dollar index =USD, which measures the US currency against six rivals, was at 96.649, near its lowest since March 2022.
In commodities, spot gold XAU= eased to $3,332.19 per ounce, after surging 1% in the previous session. The yellow metal is up 27% this year on safe-haven flows. GOL
