Most Asian currencies traded within a narrow range on Tuesday, as the U.S. dollar remained under pressure ahead of several key American economic indicators, beginning with the release of nonfarm payrolls later in the session.
Market participants adopted a cautious stance as they awaited fresh signals on the strength of the U.S. economy. The dollar struggled to regain momentum after recent losses, keeping regional foreign exchange markets subdued.
Indian rupee slides to record low
The Indian rupee underperformed its Asian peers, falling to its weakest level on record against the U.S. dollar. The decline came after softer domestic inflation data strengthened expectations for additional interest rate cuts by the Reserve Bank of India.
The local currency has been under sustained pressure since last week, as easing inflation reinforced bets that the RBI will continue its accommodative policy stance. Ongoing uncertainty surrounding U.S. trade tariffs also weighed on sentiment, with Washington’s 50% levies still in place and no agreement reached.
Markets eye BOJ meeting and global risk sentiment
Attention this week is also focused on the Bank of Japan, with investors bracing for a potential interest rate hike. Persistent inflation pressures and prolonged weakness in the yen have prompted increasingly hawkish signals from Japanese policymakers.
Broader risk appetite remained fragile, reflecting an extended downturn in global equity markets. At the same time, the Federal Reserve began its bond-buying program, adding another layer of caution across financial markets.
Dollar weak ahead of payrolls and inflation data
The dollar index and related futures edged lower during Asian trading hours, hovering near a two-month low. The greenback has been trending lower since last week, following the Federal Reserve’s decision to cut interest rates and announce monthly purchases of $40 billion in short-term U.S. Treasuries.
The bond-buying plan reinforced a dovish policy outlook, as increased liquidity is expected to ease financial conditions further. Investors are now closely watching upcoming U.S. economic releases for guidance on future monetary policy moves.
Nonfarm payrolls data for November is due later on Tuesday, while consumer price inflation figures are scheduled for release on Thursday. Both labor market conditions and inflation trends remain central to the Fed’s data-driven approach to interest rate decisions, a message reiterated by recent comments from Fed officials.
Asian currencies trade mixed
Across the region, most Asian currencies moved sideways but retained modest gains accumulated over the past week as the dollar softened. The Chinese yuan posted marginal gains, while the Singapore dollar edged slightly lower.
The Australian dollar slipped modestly, though it has advanced in recent sessions amid speculation that the Reserve Bank of Australia could raise interest rates next year due to persistent inflation pressures.
The Japanese yen strengthened, with the dollar falling to an 11-day low against the currency as traders positioned for potentially hawkish guidance from the BOJ. Japanese CPI inflation data is also expected ahead of the central bank’s policy decision later this week.
Meanwhile, the South Korean won and the Taiwan dollar weakened, pressured by ongoing capital outflows from local equity markets. Heavy selling in regional technology stocks over the past week added to currency weakness in both economies.
