USD/JPY, AUD/USD in focus as Asian equities slide on AI spending fears

Asian-Pacific markets are under pressure as Japanese and South Korean equities tumble, driven by fears over AI-related spending sustainability hitting the Nikkei and KOSPI indices. The selloff carries direct implications for USD/JPY and USD/KRW as risk-off sentiment weighs on regional currencies. Australia's June trade surplus narrowed to AU$1.929 billion, a factor pressuring AUD/USD as the data suggests softening export demand. The PBOC set the USD/CNY reference rate at 6.7895, maintaining a steady hand on yuan management. On the monetary policy front, Fed Governor Daly supported the decision to hold rates steady at the July FOMC meeting, noting that the tariff impact on inflation is beginning to fade, a mildly dovish signal for USD. Reports that Trump holds frequent informal calls with Fed Chair Warsh add a layer of political uncertainty. In Japan, an LDP lawmaker's proposal for the BOJ to sell its ETF holdings to fund tax cuts could have significant implications for JPY if pursued. Fitch assessed Korea's equity volatility as posing limited near-term credit risk, offering some reassurance to KRW holders. Traders should monitor risk sentiment and central bank developments closely.