South Korean won leads Asian FX losses as dollar edges higher; yen weakens

South Korea's won suffered the most significant losses among Asian currencies on Monday as the U.S. dollar rose, while the yen declined after partial gains from a recent intervention. Traders looked for insights from U.S. inflation data. The USD index increased by 0.18% to 99.72, close to its lowest since June 2. The U.S. job report from the previous week, which showed a job loss in July, lowered odds of a Fed rate hike in September to 44%.

The USD/KRW pair climbed 0.54% to 1,415.05, making the won the weakest Asian major currency early on. Higher oil prices contributed to the currency's weakness, with Brent crude nearing $84 a barrel amid uncertainty over the Strait of Hormuz's reopening. Korea's dependence on energy imports makes the won especially vulnerable to fuel cost hikes.

The yen also weakened, with the USD/JPY pair rising 0.30% to 158.27. The intervention by Japan and the U.S. to buy the yen since late February has largely been lost, with the currency falling back above 158. The yen has dropped around 0.5% against the dollar this month, despite climbing 3.2% in July. Intervention's effectiveness is limited, and other factors like wide U.S.-Japan rate differentials and geopolitical risks continue to pressure the currency.

Japan's holiday on Tuesday could increase market volatility due to lower liquidity. The Bank of Japan's July meeting indicated a push for more aggressive rate hikes as policymakers grapple with rising inflation risks. The RBA is expected to maintain its interest rate at 4.35% on Tuesday, with investors watching for clues on future rates and inflation.

The USD/CNY pair rose slightly to 6.7464, while the USD/SGD pair climbed 0.13% to 1.2796. The USD/INR pair increased by 0.03% to 95.226, and the USD/THB pair fell 0.08% to 33.005. The upcoming U.S. CPI report on Wednesday will be a critical test for the Fed's policy stance.