Most Asian currencies moved higher on Thursday as the U.S. dollar softened, supported by growing expectations that the Federal Reserve will cut rates next month. The South Korean won saw the strongest move in the region after the country’s central bank kept interest rates unchanged.
The U.S. Dollar Index slipped 0.1% during Asian trading hours, extending losses from earlier in the week. Dollar Index Futures were also down 0.1% as of 04:52 GMT.
Fed Rate-Cut Bets Strengthen; BoJ Expectations Build
Rate-cut expectations have risen sharply in recent days. Futures markets now imply an 86% chance of a 25-basis-point reduction at the Fed’s next meeting.
However, traders remain cautious. The extended U.S. government shutdown delayed key economic reports, leaving uncertainty around the true state of the economy.
Mixed messages from Federal Reserve officials added to the cautious tone. Some policymakers argued that inflation was easing enough to consider rate cuts “in the near term,” while others warned that rates should stay restrictive to prevent inflation from picking up again.
Speculation over potential changes in Fed leadership also drew attention. Reports suggesting Kevin Hassett is being considered as the next Fed Chair added to expectations of a more dovish central bank.
The softer dollar provided some lift for Asian currencies, though overall moves were contained due to the U.S. Thanksgiving holiday.
In Japan, the yen strengthened as USD/JPY fell 0.3%. Markets are increasingly pricing in the possibility of a Bank of Japan rate hike next month, especially after the yen hit a 10-month low last week.
The Australian dollar rose 0.3%, while the New Zealand dollar jumped 0.5%.
The Chinese yuan and Singapore dollar saw limited movement.
BoK Holds Rates; RBI Expected to Cut in December
The Bank of Korea left its benchmark rate unchanged at 2.50%, marking its fourth consecutive hold. The South Korean won strengthened following the decision, with USD/KRW dropping 0.5%.
Policymakers kept rates steady due to concerns over currency weakness and lingering inflation risks, even as South Korea’s economic outlook remains uneven.
In India, the Reserve Bank of India is expected to deliver a 25-basis-point cut at its December 5 meeting, according to a Reuters poll. The Indian rupee inched up 0.1% as USD/INR weakened.
Overall, Asian FX markets maintained a cautiously positive mood. Traders said the near-term direction will depend on the release of delayed U.S. data, clearer signals from the Fed, and confirmation of whether a leadership change at the central bank will move forward.
