The US dollar softened broadly against a basket of Asian currencies on Thursday, June 4, with the dollar index falling 0.7% to 101.3 after Federal Reserve minutes released late Wednesday signalled that policymakers remain divided over the timing of the first interest rate cut. The Japanese yen strengthened to 147.2 per dollar, its firmest level in six weeks, while the South Korean won and Singapore dollar both gained over 0.5% in Asian trading hours.

The Fed minutes showed that several committee members expressed concern about persistent services inflation, while others pointed to softening labour market indicators as justification for an earlier pivot. Markets are now pricing a 62% probability of a September cut, down from 74% just two weeks ago, as the more hawkish faction of the committee appears to have gained influence over the internal debate.

For emerging market economies across Asia and Africa, dollar softness provides meaningful relief. Countries carrying large dollar-denominated debt burdens — including Indonesia, India, and Kenya — see reduced debt servicing costs and improved capital account dynamics when the greenback weakens. The Indonesian rupiah appreciated 1.1% on the day, its best performance since January.

Currency analysts at Standard Chartered note that the trajectory of the dollar in the second half of 2026 will hinge critically on whether US core PCE inflation — the Fed’s preferred measure — breaks convincingly below 3.0% in upcoming prints. If inflation remains sticky, the risk of a prolonged higher-rate environment could reassert dollar strength, particularly if eurozone growth continues to disappoint relative to US resilience.