Asian currencies have edged higher against the dollar as markets digest lower expectations of a Fed rate hike, a shift that could lift risk appetite.

Two strategists at OCBC Group noted that benign U.S. inflation and softer labor‑market data have cut the perceived need for policy tightening. They now price only a 30 % chance of a Fed hike next month, down from around 55 % before the July [U.S.] jobs report. However, the strategists warn that the Fed will still review a new round of CPI and employment data before its September meeting, which could alter the outlook.

At 0052 GMT, the U.S. dollar was 0.1 % lower at 159.08 yen, while the Australian dollar was 0.1 % higher at US$0.7089, according to LSEG data. The modest gains in the yen and AUD reflect investors’ optimism that U.S. monetary tightening may be easing. As the Federal Reserve’s policy path remains uncertain, Asian currency markets are poised to react quickly to any new economic data or policy adjustments.

The reduced probability has already begun to influence forex flows, with Asian traders pulling back from defensive positions and allocating more to growth‑bearing currencies.