Asian currencies weakened on Tuesday as uncertainty around a potential U.S. interest rate cut next month dampened risk sentiment. The Japanese yen remained close to nine-month lows, weighed down by rising fiscal concerns in Tokyo.
The U.S. Dollar Index slipped 0.1%, with futures showing a similar decline as of 04:27 GMT.
Yen Near 9-Month Low on Fiscal Worries
The yen recovered slightly after touching levels last seen in February, pushing the USD/JPY pair down 0.2%.
At the same time, long-term Japanese government bond yields surged to multi-decade highs, with the 20-year yield hitting a new record.
Investors are increasingly worried that Prime Minister Sanae Takaichi’s expected fiscal package could add pressure to Japan’s already heavy debt load. Reuters reported that Goushi Kataoka, a private-sector adviser, believes Japan will need a stimulus plan worth about $149 billion to support economic growth.
Additional reports suggest the package may include tax cuts aimed at boosting spending and investment. Finance Minister Satsuki Katayama noted that the government is monitoring foreign exchange markets with heightened urgency due to recent volatility.
Fed Uncertainty Pressures Asian Currencies
Confusion over the Federal Reserve’s December policy path also weighed on regional currencies.
Fed Governor Christopher Waller said a rate cut may be justified if labor market conditions continue to weaken. However, he emphasized that policymakers still lack key economic data after several releases were delayed during the recent U.S. government shutdown.
With mixed signals from other Fed officials, markets remain unsure about the central bank’s next move. The data backlog will begin to clear later this week when the September non-farm payrolls report—originally delayed by the shutdown—is released on Thursday.
Across Asia, currency movements were mixed. The South Korean won slipped 0.3%, while the Singapore dollar held steady. The Australian dollar fell 0.4%, and both the onshore USD/CNY and offshore USD/CNH ticked 0.1% higher. The Indian rupee traded mostly unchanged.
