Most Asian currencies edged lower on Wednesday as investors evaluated the Federal Reserve’s future interest rate direction following softer U.S. labor market data. At the same time, the Indian rupee staged a sharp rebound from record lows amid growing speculation of central bank intervention.
The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, advanced 0.3% during Asian trading hours. U.S. Dollar Index futures were also up 0.3% as of 04:55 GMT, reflecting continued demand for the dollar.
Indian rupee rebounds strongly from record lows
The Indian rupee gained more than 1% against the U.S. dollar after falling to consecutive record lows earlier in the week. The USD/INR pair was last down 0.6% at 90.385, after dropping as much as 1.2% to 89.785 earlier in the session. On Tuesday, the pair had touched an all-time high of 91.077.
According to media reports, state-owned banks were seen selling dollars, fuelling market speculation that the Reserve Bank of India may have stepped in to contain excessive currency volatility.
The rupee has faced persistent pressure due to sustained foreign portfolio outflows, strong dollar demand from importers, and ongoing uncertainty surrounding trade relations with the United States.
Fed outlook clouds after softer U.S. jobs data
U.S. labor market data released on Tuesday showed nonfarm payrolls increased by 64,000 jobs in November, beating market expectations. However, this followed a steep loss of 105,000 jobs in October. The unemployment rate also rose to 4.6%, its highest level since 2021.
These figures signaled a cooling labor market and added uncertainty to the Federal Reserve’s policy outlook.
ING analysts noted that slowing job creation and rising unemployment strengthen the case for further interest rate cuts. They also warned that the risk of outright job losses is increasing, which could intensify political pressure on the Fed as mid-term elections draw closer.
Asian currencies show mixed performance
Elsewhere in Asia, China’s onshore yuan traded largely flat, with the USD/CNY pair little changed. The Singapore dollar weakened slightly, with USD/SGD up 0.2%.
The Australian dollar fell 0.3% against the U.S. dollar, while the Japanese yen weakened, pushing USD/JPY 0.3% higher. The South Korean won also declined, with USD/KRW jumping 0.5%.
Bank of Japan meeting in focus
Market attention is now shifting to Japan, where the Bank of Japan is set to announce its policy decision later this week.
The central bank is widely expected to raise interest rates as policymakers respond to signs of more sustained inflation and improving wage growth. Such a move would mark another step away from Japan’s ultra-loose monetary policy and could offer additional support to the yen.
