Most Asian currencies inched higher on Friday while the U.S. dollar extended losses, as traders held firm on expectations for a Federal Reserve interest rate cut next week despite sticky U.S. inflation data.
The upward trend left most Asian currencies with modest weekly gains. An exception was the Indian rupee, which hit record lows after reports suggested Washington was urging the EU and G7 to impose harsher tariffs on Russian oil buyers, including India and China. The news overshadowed optimism about ongoing trade talks between New Delhi and Washington.
The Australian dollar outperformed, supported by rising commodity prices, especially metals. The Taiwan dollar also strengthened on increased capital inflows into local technology stocks.
Indian Rupee Under Pressure
The USD/INR pair rose 0.2% in morning trade after touching a record 88.499 rupees in the previous session. Concerns grew after reports indicated President Donald Trump may push for doubling current U.S. tariffs on exports from India and China. While trade talks remain on the agenda, the rupee still ended the week slightly weaker.
Chinese Yuan and Other Currencies
The Chinese yuan (USD/CNY) gained 0.1% but still ended with only mild weekly gains. While policy support from Beijing has kept the yuan near 10-month highs, weaker trade and inflation data raised fresh concerns over China’s economy.
The Australian dollar (AUD/USD) rose 0.1% on Friday and gained 1.8% this week. The Taiwan dollar (USD/TWD) fell 0.2% on Friday but advanced 0.8% weekly, lifted by strong demand for tech shares.
Elsewhere, the Japanese yen (USD/JPY) rose 0.2% after sharp swings earlier in the week following Prime Minister Shigeru Ishiba’s sudden resignation. The Singapore dollar (USD/SGD) edged up 0.1%, while the South Korean won (USD/KRW) slipped 0.1%.
Dollar Weakens on Fed Cut Bets
The dollar index fell slightly in Asian trade and was down 0.2% for the week. Despite August CPI data coming in slightly above expectations, core inflation matched forecasts, easing fears of further tariff-driven price spikes.
With signs of a softer U.S. labor market, traders continue to expect the Fed to cut rates by 25 basis points at its September 16–17 meeting. CME FedWatch data shows a 96.8% probability of a quarter-point cut, and only a 3.2% chance of a larger 50 bps move.
