The South Korean won rose to around 1,385 per dollar on Tuesday, reversing losses from the previous session due largely to the dollar's weakness. Signs of a cooling US labor market strengthened Fed cut bets, pressuring the dollar and supporting Asian currencies. Domestically, sentiment was tempered after Seoul expressed deep regret over a US immigration raid at a Hyundai–LG battery plant, raising concerns about diplomatic friction for Korean firms in the US. Authorities pledged to safeguard corporate interests abroad, though investors remained cautious as the issue highlighted vulnerabilities in cross-border investment ties. At the same time, policymakers continued discussions with Washington on tariffs and investment rules, underscoring Seoul’s effort to safeguard national interests in trade negotiations. Markets also awaited key US inflation reports later this week that could guide the Fed’s policy outlook and the broader dollar direction.

The Australian dollar strengthened past $0.66 on Tuesday, marking its third consecutive session of gains and reaching its highest level in over a month. The rally was fueled by a softer greenback, as expectations mount for more aggressive interest rate cuts by the Federal Reserve. Markets are currently pricing in an 89% probability of a 25 bps cut at next week’s meeting, while some traders are even positioning for a larger 50 bps reduction. On the domestic economic front, the Westpac-Melbourne Institute Consumer Sentiment Index fell 3.1% to 95.4 in September, reversing a 5.7% jump in August that had lifted the index to its highest level since early 2022. The latest figure indicates that consumer pessimism continues to outweigh optimism, underscoring persistent concerns over domestic demand. Meanwhile, the NAB Business Confidence Index dropped to a three-month low of 4 in August 2025, from an upwardly revised 8 in the previous month — the highest reading since August 2022.

The Japanese yen strengthened to around 147.3 per dollar on Tuesday, extending gains from the prior session as the dollar slipped on growing expectations for deeper US Federal Reserve rate cuts. Markets looked ahead to anticipated downward revisions in US employment data covering April 2024 to March 2025, which could underscore that the Fed is lagging in its mandate to maximize employment. Traders currently price in an 89% probability of a 25 basis point cut next week, while some continue to position for a larger 50 basis point move. Domestically, investors weighed the political implications of Prime Minister Shigeru Ishiba’s resignation, which came after escalating rifts within the ruling party and pressure following his national election defeat late last year. The development also coincided with setbacks in Japan’s efforts to secure a trade deal with the US.