Most Asian currencies held steady on Thursday after posting modest gains overnight. Traders continued to price in the possibility of a Federal Reserve rate cut next week. However, the Indian rupee weakened further and slipped to a new record low amid ongoing capital outflow pressures.
The U.S. Dollar Index inched up 0.1% after hitting a one-month low overnight. Dollar Index futures were up 0.2% as of 06:14 GMT.
Rupee hits fresh record low; markets watch RBI response
The USD/INR pair touched a new all-time high of 90.46 in early trading, surpassing Wednesday’s previous record of 90.29. By 05:50 GMT, the pair was trading flat around 90.22.
The rupee continues to face strong external headwinds. Weak trade performance, soft portfolio inflows, limited foreign direct investment, and uncertainty over a potential U.S.–India trade deal all contributed to the currency’s decline.
Analysts at MUFG noted that the Reserve Bank of India has so far taken a hands-off approach to intervention. They said markets will be watching closely for any policy signals from the upcoming RBI meeting.
From a broader perspective, MUFG analysts expect a trade deal between the U.S. and India to eventually reduce tariffs from 50% to 25%. They believe such a development could provide relief for the rupee in the first quarter of 2026.
Fed outlook remains split despite easing expectations
Across the rest of Asia, major currencies were mostly stable. Recent U.S. data — including a softer ADP jobs report and a subdued ISM services reading — strengthened expectations of an interest rate cut at next week’s Fed meeting.
MUFG analysts added that the December meeting is likely to show a divided committee, but still points toward a rate cut.
Traders are now waiting for Friday’s U.S. Personal Consumption Expenditures (PCE) inflation report. This is a key indicator that could influence the Federal Reserve’s next policy move.
The Japanese yen’s USD/JPY pair was largely unchanged. The Singapore dollar (USD/SGD) rose 0.2%. The South Korean won’s USD/KRW pair slipped 0.4%, marking one of the weaker regional performances.
In China, the onshore USD/CNY pair was steady, while the offshore USD/CNH pair ticked 0.1% higher. The Australian dollar’s AUD/USD pair gained 0.2%.
