Asian currencies traded mostly steady on Monday as investors prepared for a potential Federal Reserve rate cut later this week. The Indian rupee, however, weakened again and moved back toward the record lows seen last week.
Expectations for a December rate cut remained firm after the latest U.S. PCE inflation data signaled further easing. This strengthened the case for a reduction in interest rates.
The U.S. Dollar Index slipped 0.2% in Asian trade, reflecting softer demand for the greenback. Even so, traders were hesitant to take on additional risk ahead of the Fed’s final policy meeting of the year. Recent speeches from Fed officials have delivered mixed signals on the pace of future rate cuts.
According to MUFG analysts, the main focus for markets will be the Fed’s forward guidance. Investors are seeking clearer direction on how quickly and how far policymakers intend to ease policy over the coming year.
Rupee Nears Record Low Again
The Indian rupee continued to underperform in the region. It hovered near the 90 per dollar level, pressured by foreign portfolio outflows and uncertainty surrounding a potential U.S. trade agreement.
The USD/INR pair last traded 0.2% higher at 90.2 as of 06:03 GMT, approaching last week’s all-time high of 90.5. The move followed the Reserve Bank of India’s decision to cut its repo rate by 25 basis points to 5.25% on Friday. The widely expected cut showed little resistance to the rupee’s ongoing weakness.
Japan GDP Revision Shows Deeper Contraction
The Japanese yen saw little movement, with the USD/JPY pair dipping 0.1%. Revised GDP data for the third quarter showed a sharper-than-expected contraction, driven by weaker capital spending and soft exports.
Despite the downgrade, expectations remain that the Bank of Japan is still on course for a rate hike. Markets are now watching wage indicators and upcoming comments from policymakers for confirmation.
China’s Exports Rebound in November
In China, the USD/CNY pair was mostly unchanged. Fresh trade data showed a wider November surplus, supported by a 5.9% increase in exports year-on-year, while imports grew at a slower pace. The figures pointed to improving global demand and suggested that a U.S.–China trade truce may be helping stabilize the external sector.
Elsewhere in the region, the South Korean won’s USD/KRW pair fell 0.3%. The Singapore dollar’s USD/SGD pair was largely flat, while the Australian dollar’s AUD/USD pair edged up 0.1%.
