Asian Currencies Steady as Rupee Slides to New Low Against the Dollar

Key Moments

Most major Asian currencies traded in tight ranges even as expectations increased for a Federal Reserve rate cut at its December meeting.
The Indian rupee weakened to a record 89.92 per dollar, pressured by persistent foreign fund outflows, trade uncertainties, and a wider current account deficit.
Bank of Japan Governor Kazuo Ueda’s hawkish remarks pushed Japanese government bond yields to multi-decade highs, adding to a global rise in bond yields.

Regional FX Holds Steady Despite Fed Cut Expectations

Most Asian currencies were confined to narrow trading bands on Tuesday, even as traders increasingly positioned for a potential interest rate cut by the Federal Reserve next week. The subdued currency moves came alongside a largely unchanged U.S. dollar during Asian hours.

The US Dollar Index, which tracks the U.S. currency against a set of major peers, was broadly unchanged in Asia. US Dollar Index Futures were also flat as of 05:54 GMT, signaling limited directional conviction in the near term.

Global Bond Yields Climb Following BOJ Signals

The restrained reaction in Asian foreign exchange markets followed a sharp move higher in global bond yields overnight, triggered by hawkish commentary from Bank of Japan Governor Kazuo Ueda.

Ueda, speaking over the weekend, indicated that the BOJ could contemplate a rate increase as early as this month. His comments pushed Japanese Government Bond yields to multi-decade highs. The 30-year JGB yield moved above 1.9%, while the 10-year yield approached 1.88%.

The U.S. dollar was largely stable overnight after seeing substantial intraday volatility, as investors weighed the likelihood of a Fed rate cut against the broader backdrop of tightening bond markets globally.

Expectations for a U.S. rate reduction have strengthened compared with last week, following more cautious remarks from several Fed officials regarding the risks of keeping policy excessively restrictive. Money markets now assign close to an 87% probability of a 25-basis-point cut at the December meeting.

Major Asian Currency Moves

Within Asia, the Japanese yen weakened modestly, with the USD/JPY pair rising 0.2% after having fallen 0.5% in the previous session.

The South Korean won saw a slight gain, with the USD/KRW pair slipping 0.2%. The Singapore dollar was little changed, as USD/SGD traded flat.

The Chinese yuan was also steady, with the onshore USD/CNY pair holding largely unchanged. The Australian dollar’s AUD/USD pair likewise showed no significant movement.

Currency Pair	Move	Comment
USD/JPY	+0.2%	Yen weakened after prior 0.5% decline
USD/KRW	-0.2%	Won edged higher
USD/SGD	Flat	Singapore dollar stable
USD/CNY (onshore)	Flat	Yuan largely unchanged
AUD/USD	Flat	Australian dollar steady
USD/INR	+0.3%	Rupee hit record low of 89.92

Indian Rupee Sinks to Record Low Near 90 per Dollar

The sharpest move in the region came from India, where the rupee dropped to a new all-time low of 89.92 against the U.S. dollar. The USD/INR pair advanced 0.3% as selling pressure on the rupee intensified.

Analysts linked the latest bout of weakness to ongoing foreign portfolio outflows, delays in a potential U.S.-India trade agreement, and a widening current account deficit. These factors weighed on the currency despite strong domestic growth metrics.

The rupee’s vulnerability has persisted even as India recorded robust GDP expansion of 8.2% for the July-September quarter.

MUFG Outlook on INR and RBI Policy Path

MUFG analysts expect further depreciation in the rupee over time. They wrote: “We forecast more INR weakness, and now expect USD/INR to rise modestly above the 90 levels in 2026, targeting 90.80 by the September 2026 quarter,” in a note.

On monetary policy, the analysts added: “RBI is close to the end of the rate cut cycle – We forecast one more repo rate cut, from our previous expectation of two cuts, bringing the repo rate to 5.25%. We think RBI could delay its rate cut to the February 2026 meeting from December, given the recent strong GDP print.”