Most Asian currencies traded within a narrow range on Tuesday, even as expectations grew for a Federal Reserve rate cut next week. The Indian rupee was the main exception, falling to a new record low as foreign outflows continued to weigh on the currency.
The U.S. Dollar Index, which tracks the dollar against major global currencies, held steady during Asian trading hours. Dollar Index Futures were also flat as of 05:54 GMT.
Global bond yields climb as markets watch Fed signals
The muted reaction across Asia followed a sharp rise in global bond yields overnight. The move came after Bank of Japan Governor Kazuo Ueda signaled the possibility of an interest rate increase as early as this month.
Ueda’s comments pushed Japanese Government Bond yields to multi-decade highs. The 30-year JGB yield moved above 1.9%, while the 10-year yield approached 1.88%.
The U.S. dollar remained relatively stable overnight after recent choppy trading, as investors weighed the likelihood of a Fed rate cut against broader tightening trends in global bond markets.
Expectations for a December rate cut have strengthened compared to last week. Several Fed officials struck a more cautious tone on keeping policy restrictive, and money markets now price in roughly an 87% probability of a quarter-point cut at the upcoming meeting.
Asian currency movements
In Asia, the Japanese yen edged 0.2% higher in the USD/JPY pair after a 0.5% drop the previous session.
The South Korean won slipped 0.2% against the dollar, while the Singapore dollar traded mostly unchanged. The Chinese yuan’s onshore USD/CNY pair was also steady, and the Australian dollar showed no significant movement.
Indian rupee hits new record low
The Indian rupee fell to a record low of 89.92 per dollar, with the USD/INR pair rising 0.3% during the session.
Analysts pointed to continued foreign outflows, delays in a potential U.S.–India trade agreement, and a widening current account deficit as the main drivers of the currency’s weakness. This pressure has persisted despite India reporting strong GDP growth of 8.2% for the July–September quarter.
MUFG analysts expect further depreciation in the rupee. They now forecast USD/INR to move modestly above the 90 mark in 2026, with a target of 90.80 by the September quarter.
They also noted that the Reserve Bank of India is nearing the end of its rate-cutting cycle. MUFG now projects one final repo rate cut to 5.25%, instead of the two previously expected, and said the move may be pushed from December to February 2026 following the strong GDP data.
