Most Asian currencies edged higher on Thursday as the U.S. dollar softened on rising expectations of a Federal Reserve rate cut next month, while the South Korean won jumped after the country’s central bank held rates steady.
The US Dollar Index edged 0.1% lower in Asia hours after sharp declines in the past two sessions. US Dollar Index Futures also traded 0.1% lower as of 04:52 GMT.
Fed easing bets firm; BoJ rate hike signals in focus Rate-cut bets have firmed sharply in recent days. Futures markets now imply an 86% probability of a 25-basis-point reduction.
Traders, however, are wary of making strong directional bets because the prolonged U.S. government shutdown delayed several key economic releases, leaving an incomplete picture of underlying conditions.
Conflicting signals from Fed policymakers have added to the uncertainty. Some officials have emphasised that inflation is easing sufficiently to consider policy easing “in the near term,” while others have maintained that the Fed should keep rates restrictive for longer to avoid re-accelerating price pressures.
Speculation about potential changes in Fed leadership has also drawn market attention. Reports that Kevin Hassett is being considered for the chairman role have been interpreted as a move that could tilt the central bank toward a more dovish stance.
A weaker dollar spurred some gains in regional currencies, although moves were limited due to a holiday in the U.S.
In Japan, the yen’s USD/JPY pair fell 0.3% on increased chances of a Bank of Japan rate hike as soon as next month. The move could also come in light of the yen hitting a 10-month low last week.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. Elsewhere, the Australian dollar’s AUD/USD gained 0.3% on Thursday, while the New Zealand dollar’s USD/NZD jumped 0.5%.
Chinese yuan’s onshore pair USD/CNY and the Singapore dollar’s USD/SGD were both largely muted.
BoK keeps rates unchanged; RBI expected to ease next month In other regional central-bank developments, the Bank of Korea kept its benchmark rate unchanged at 2.50% on Thursday, marking a fourth straight meeting without a cut.
The South Korean won’s USD/KRW pair jumped 0.5% on Tuesday.
The decision reflected policymakers’ concerns about currency weakness and persistent inflation pressures, even as the domestic economy shows uneven momentum.
In India, the Reserve Bank of India is widely expected to cut its policy rate by 25 basis points at its Dec. 5 meeting, according to a Reuters poll.
The Indian rupee’s USD/INR pair edged up 0.1% on Thursday.
Overall, Asian currency markets held a cautiously optimistic tone. Traders said the near-term outlook will depend on the flow of delayed U.S. data, clarity on the Fed’s policy path, and confirmation of whether a leadership reshuffle will actually proceed.
