Asian currencies traded mixed on Tuesday as the US dollar strengthened ahead of the Federal Reserve’s upcoming interest rate decision. Meanwhile, the Japanese yen weakened, and the Indonesian rupiah remained under pressure near record lows.
Investors also reduced their exposure to the euro and British pound as several major central banks prepared to announce monetary policy decisions later this week.
The US Dollar Index gained 0.2%, while USD/JPY rose by a similar margin. Additionally, the euro and sterling declined approximately 0.1% against the greenback.
In Southeast Asia, USD/IDR advanced 0.2% to 18,129.1, reflecting continued weakness in Indonesia’s currency.
Japanese Yen Weakens Ahead of Bank of Japan Decision
The Japanese yen retreated against the US dollar, reversing part of its recent gains as demand for safe-haven assets eased.
During the previous week, the yen had outperformed several major currencies as concerns surrounding elevated artificial intelligence stock valuations encouraged investors to seek defensive positions.
However, improving market sentiment has reduced that demand, leaving the Japanese currency vulnerable to further fluctuations.
The USD/JPY exchange rate climbed toward 157.73, extending its retreat from the one-month high reached last week.
Investors are now turning their attention to the Bank of Japan’s upcoming monetary policy meeting.
The Japanese central bank is widely expected to maintain its benchmark interest rate at 1.25% when its two-day meeting concludes on Friday, October 30.
Nevertheless, policymakers could signal that additional interest rate increases remain possible as domestic inflationary pressures continue to build.
Meanwhile, the Federal Reserve is scheduled to announce its monetary policy decision on Wednesday, October 28.
Markets generally expect the US central bank to leave borrowing costs unchanged. However, investors will closely examine its guidance for indications of future interest rate adjustments.
Four other major central banks are also scheduled to announce policy decisions this week, potentially increasing volatility across global currency markets.
Indonesian Rupiah Approaches Record Lows
The Indonesian rupiah remained among Asia’s weakest-performing currencies as investors continued to assess the country’s economic and financial outlook.
The USD/IDR pair climbed to approximately 18,129, following a 0.4% decline in the rupiah during Monday’s session.
Consequently, Indonesia’s currency remained close to the historic low recorded in early June.
The rupiah has depreciated approximately 8% against the US dollar in 2026, placing it alongside the Philippine peso among the region’s weakest currencies.
Several factors have contributed to the decline, including elevated global bond yields, rising oil prices and persistent foreign capital outflows.
Additionally, concerns about Indonesia’s potential removal from MSCI’s emerging-market classification have increased uncertainty among international investors.
Such a reclassification could reduce foreign investment in Indonesian equities, placing additional pressure on the country’s financial markets and currency.
Bank Indonesia Introduces Measures to Support the Rupiah
Bank Indonesia has indicated that it is prepared to strengthen its policy response to stabilize the national currency.
Last week, the central bank pledged to make necessary adjustments to its monetary policy instruments while maintaining its benchmark interest rate at 5.75%.
Rather than raising its main policy rate, officials have prioritized foreign exchange intervention and measures designed to encourage capital inflows.
Furthermore, Bank Indonesia increased its deposit facility rate from 4.75% to 5.00%.
The central bank also introduced stronger incentives for currency hedging and foreign investment, aiming to improve financial stability without placing excessive pressure on domestic economic activity.
However, continued foreign selling and uncertainty surrounding Indonesia’s market classification remain significant challenges for the rupiah.
Other Asian Currencies Show Mixed Performance
Elsewhere in Asia, currency movements remained relatively limited as traders awaited further signals from major central banks.
The Chinese yuan traded largely unchanged, with the offshore USD/CNH exchange rate hovering around 6.6678.
Meanwhile, the onshore USD/CNY pair declined slightly by 0.03% to 6.6683.
The South Korean won strengthened modestly against the dollar, pushing USD/KRW down 0.1% to approximately 1,324.36.
The Australian and New Zealand dollars also recorded moderate gains.
The Australian dollar advanced 0.1% to $0.7025, while the New Zealand dollar climbed 0.3% to $0.5695.
However, the Indian rupee weakened as USD/INR increased 0.2% to 95.353.
Similarly, the Singapore dollar edged lower, with USD/SGD rising 0.04% to approximately 1.2809.
Federal Reserve Decision Could Shape Asian Currency Outlook
Asian currency markets remain focused on the Federal Reserve’s interest rate announcement and the Bank of Japan’s subsequent policy guidance.
Although both central banks are expected to maintain their current interest rates, their statements could influence expectations for future monetary policy.
In particular, any changes in the outlook for US interest rates could affect the dollar’s strength and the direction of the USD/JPY currency pair.
Meanwhile, the Indonesian rupiah remains especially vulnerable to sustained foreign capital outflows and broader changes in global risk sentiment.
With several major monetary policy decisions approaching, currency traders are preparing for potentially increased volatility across Asian foreign exchange markets.
