Asian currencies held steady on Thursday after sharp declines the day before. The move came as the U.S. dollar strengthened following Federal Reserve minutes that lowered expectations for a potential rate cut in December.
The Japanese yen weakened further, touching a ten-month low. Markets grew more concerned about Japan’s fiscal direction, especially as authorities offered no new hints of intervention.
Dollar Rises After Split Fed Minutes; China Holds Rates
Minutes from the Fed’s October meeting showed policymakers were divided. Many officials dismissed the chance of a December cut, while several still viewed it as possible. The split added uncertainty around the U.S. outlook and led traders to scale back expectations for near-term easing.
MUFG analysts noted that they still expect a December cut but warned the meeting could be highly divided due to unclear U.S. data trends.
The U.S. Dollar Index rose 0.7% overnight. Traders interpreted the move as a sign the Fed may lean more hawkish in the short term.
Across Asia, the South Korean won’s USD/KRW pair inched 0.1% higher after a stronger climb earlier.
The Singapore dollar’s USD/SGD pair also rose 0.1%, while India’s USD/INR advanced 0.2%.
Australia’s AUD/USD pair recovered slightly after a 0.5% loss on Wednesday.
China’s onshore USD/CNY pair gained 0.1%, while the offshore USD/CNH pair was little changed.
Fresh data on Thursday confirmed that China kept its loan prime rate unchanged, in line with expectations. Beijing signaled that additional monetary support was not urgent at this stage.
Yen Slips to 10-Month Low as Fiscal Worries Grow
The Japanese yen’s USD/JPY pair rose to 157.36, its highest level since mid-January. The yen had already fallen more than 1% the previous day.
Bank of Japan Governor Kazuo Ueda met on Wednesday with Finance Minister Satsuki Katayama and Economic and Fiscal Minister Minoru Kiuchi to review financial conditions. Katayama later said the meeting did not include “specific discussions” about the yen, signaling a cautious stance on direct intervention.
Analysts at MUFG said Japan’s currency remains under pressure due to two major uncertainties: the government’s pending fiscal stimulus package and ongoing tensions between China and Japan.
They added that they expect USD/JPY to decline over the medium term into 2026. However, the lack of official pushback against yen weakness, combined with fiscal concerns, is likely to weigh on the currency in the near future.
