Most Asian currencies and the U.S. dollar traded largely flat on Monday as thin year-end conditions kept market activity subdued. The standout was the South Korean won, which extended recent gains after government measures aimed at stabilising the currency.
The U.S. dollar index, which tracks the greenback against a basket of major peers, edged up 0.1%. Dollar index futures were also 0.1% higher as of 06:45 GMT, reflecting limited conviction amid low holiday liquidity.
Asia FX steady as markets assess Fed outlook
Asian currencies have drawn mild support from expectations that the Federal Reserve will continue easing monetary policy in 2026 following its most recent rate cut. Anticipation of further reductions in borrowing costs has pressured the dollar in recent weeks by narrowing interest rate differentials.
Futures markets are increasingly pricing in additional rate cuts next year as economic growth shows signs of slowing and inflation pressures ease. This backdrop has offered modest support to higher-yielding and emerging Asian currencies.
In regional trading, the Japanese yen strengthened slightly, with the USD/JPY pair down 0.2%. The Singapore dollar remained steady, while the Indian rupee showed little movement. In China, the onshore yuan was flat, while the offshore yuan edged 0.1% higher. The Australian dollar also traded sideways.
South Korean won extends gains on policy support
The South Korean won outperformed regional peers, building on strong gains from last week after authorities pledged to counter excessive currency volatility. The USD/KRW pair was last down 0.7%, hovering near a two-month low, after falling 2.5% in the previous week.
Government signals of firm commitment to currency stability helped restore confidence after the won faced sustained pressure earlier in the year. Media reports also indicated that South Korea’s National Pension Fund has launched a new round of strategic foreign exchange hedging, adding further support to the currency.
