Asian Currencies Steady as Markets Lean Toward Potential Fed Rate Cut

Key Moments

Asia FX Holds Ground as Dollar Recoups Some Losses

Most major Asian currencies were broadly steady on Thursday, consolidating modest overnight gains as market participants continued to position for a potential interest-rate reduction by the Federal Reserve next week. Against this backdrop, the U.S. dollar regained some lost ground following a recent decline.

The US Dollar Index, which tracks the U.S. currency against a basket of major peers, ticked up 0.1% after having dropped to a one-month low overnight. US Dollar Index Futures were 0.2% higher as of 06:14 GMT.

Indian Rupee Hits New Record Low Amid Persistent Outflow Pressures

The Indian rupee remained under notable pressure. The USD/INR pair climbed to a fresh all-time high of 90.46 in early trading, moving beyond Wednesday’s previous record of 90.29. By 05:50 GMT, the pair was trading largely flat around 90.22.

The rupee’s weakness has coincided with a combination of external headwinds, including soft trade and portfolio flows, subdued foreign direct investment, and lingering uncertainty surrounding a U.S.-India trade agreement.

MUFG analysts noted a relatively restrained stance from the Reserve Bank of India so far: “Thus far, RBI seems more hands-off in terms of intervention, and it’ll be important to see whether there are any policy signals from the upcoming RBI policy meeting later this week on the Indian Rupee,” they said in a note.

The same analysts added: “From a fundamental perspective, we are assuming that a trade deal between US and India bringing tariffs down to 25% from 50% currently will ultimately be reached, and as such, we do see some relief for INR in 1Q2026.”

Key FX Levels in Asia

Fed Outlook: Markets Focus on Data and Policy Signals

Across the region, trading in major Asian currencies remained relatively subdued as investors monitored U.S. macroeconomic data that has reinforced expectations for an upcoming Fed rate cut. Recent releases included a weaker-than-anticipated ADP private employment report on Monday and a soft reading from the ISM services survey.

Commenting on the policy backdrop, MUFG analysts stated: “Overall, we think that the December Fed meeting will be quite a divided one, but ultimately points towards a cut.”

Attention is now shifting to Friday’s release of U.S. Personal Consumption Expenditures inflation data, which is seen as an important input for the Fed’s decision-making process.

Regional Currency Moves Outside India

In Japan, the yen showed limited movement, with USD/JPY largely unchanged. The Singapore dollar strengthened modestly, as USD/SGD slipped 0.2%.

The South Korean won underperformed among major Asian currencies, with USD/KRW rising 0.4% and leading regional declines.

In China, the onshore yuan was steady, with USD/CNY showing little change, while the offshore yuan saw USD/CNH edge 0.1% higher.

The Australian dollar advanced, with AUD/USD gaining 0.2% on Thursday.