Most Asian currencies saw little movement on Friday, even as expectations for a potential Federal Reserve rate cut next month increased. Investors also shifted their attention to Tokyo’s inflation data to gauge the Bank of Japan’s upcoming policy stance.
The U.S. Dollar Index remained flat during Asian hours but was still on track for a sharp weekly decline. Dollar Index Futures were also unchanged as of 04:50 GMT.
Fed Rate Cut Expectations Rise
Traders significantly boosted the probability of a 25-basis-point Fed cut at the December 9–10 meeting. The odds climbed to around 87%, up from roughly 40% one week earlier. This shift pushed the dollar lower and reduced yields across the U.S. Treasury curve.
The move was supported by soft U.S. economic data and dovish comments from Federal Reserve officials. Still, investors remain cautious given the limited data flow and the mixed signals coming from policymakers.
Speculation surrounding the potential appointment of Kevin Hassett as the next Fed Chair added another point of uncertainty. Markets expect that a Hassett-led Fed could lean toward earlier rate cuts and stronger support for economic growth — a scenario that would typically weigh further on the dollar.
Among regional currencies, the South Korean won strengthened 0.2%, while the Singapore dollar traded flat.
The Indian rupee edged up 0.1%, and the Malaysian ringgit was steady.
In China, the onshore yuan saw little change.
The Australian dollar was also muted.
Tokyo Inflation Strengthens BOJ Hike Expectations
In Japan, attention centered on Tokyo’s consumer price figures. Inflation in the capital stayed above the BOJ’s 2% target, increasing expectations that the central bank may consider raising interest rates again.
Tokyo’s core inflation has been holding in the high 2% range, strengthening the case for near-term policy tightening. The Japanese yen reflected this outlook, with the USD/JPY pair slipping 0.1%.
Additional data released on Friday showed stronger-than-expected industrial production and retail sales, further supporting the prospect of a December BOJ rate hike.
As ING analysts noted, “Japanese inflation remained well above 2%, while stronger-than-expected production and retail sales are likely to reinforce the Bank of Japan’s confidence to hike interest rates in December.”
