Most Asian currencies edged lower on Monday as traders assessed mixed signals surrounding the Federal Reserve’s potential policy decision next month. The Indian rupee, however, recovered from record lows after signs of support from the central bank.
The US Dollar Index held steady on Monday following gains of more than 1% last week. Dollar Index Futures were also little changed as of 04:42 GMT.
According to the CME FedWatch Tool, market expectations for a 25-basis-point rate cut in December climbed to roughly 69%, up from about 44% a week earlier. The shift came after comments from New York Fed President John Williams, who indicated that a policy adjustment could be possible soon. Still, several Fed officials warned that inflation remains elevated and the labor market remains tight, leaving the direction of December’s decision uncertain.
ING analysts noted that minutes from the October FOMC meeting showed many policymakers were leaning against a cut. They added that without key inflation and jobs data before the vote, there may not be enough evidence to change their stance.
The offshore Chinese yuan’s USD/CNH pair rose 0.1%, while the Singapore dollar’s USD/SGD pair gained 0.2%. The South Korean won weakened 0.5% against the dollar, leading losses across the region. The Australian dollar’s AUD/USD pair was mostly flat.
Yen under pressure from fiscal concerns
The Japanese yen continued to face pressure after hitting multi-month lows last week. Investors expect the Bank of Japan to maintain or even ease policy, especially as Prime Minister Sanae Takaichi’s new government leans toward expansionary fiscal and monetary measures.
The USD/JPY pair rose 0.1% on Monday after jumping more than 1% last week.
Yen weakness eased slightly after officials in Tokyo intensified warnings that they could intervene if the currency’s decline becomes disorderly.
MUFG analysts said the yen’s weakness has become a key focus for markets, with concerns tied to BOJ rate-hike uncertainty, the size of fiscal stimulus, and growing tensions between Japan and China.
Indian rupee rebounds on RBI support
The Indian rupee strengthened, with the USD/INR pair falling 0.5%, after the currency had surged over 1% to a record high of 89.72 on Friday. Reports indicated that possible intervention by the Reserve Bank of India helped halt the sharp decline.
MUFG analysts noted that the RBI had been defending the 88.80 level, but heavy stop losses were likely triggered on Friday once the currency quickly moved beyond that threshold while the central bank stayed on the sidelines.
