Asian Currencies Mixed as Dollar Retreats From 18-Month High

Asian currencies traded unevenly on Thursday as the U.S. dollar weakened from an 18-month peak, with investors reassessing expectations for Federal Reserve interest rate hikes following stronger-than-expected U.S. inflation data.

The U.S. dollar index declined 0.6% to 101.96 by 23:50 ET (03:50 GMT), reversing part of Wednesday’s 0.4% gain after the release of September consumer price figures.

U.S. annual inflation accelerated to 3.7% in September from 3.4% in August, surpassing economists’ forecasts of 3.6%. Core inflation, which excludes volatile food and energy prices, increased 2.6%, slightly above the anticipated 2.5%.

The stronger inflation readings initially fueled speculation that the Federal Reserve could raise interest rates at its October 27–28 policy meeting. However, cautious remarks from Fed Vice Chair Michelle Bowman and San Francisco Fed President Mary Daly suggested policymakers may prefer additional economic evidence before considering further monetary tightening.

As U.S. Treasury yields retreated, market expectations for an October rate hike moderated. Investors now await upcoming producer price inflation, retail sales figures, and additional Federal Reserve commentary for clearer signals about future monetary policy.

Across Asian foreign exchange markets, the Japanese yen strengthened, pushing the USD/JPY currency pair down approximately 0.4%. Japan’s Finance Minister Satsuki Katayama reinforced warnings against excessive exchange rate volatility.

Meanwhile, the Chinese yuan remained relatively stable, with both onshore USD/CNY and offshore USD/CNH trading largely unchanged.

The South Korean won suffered the sharpest regional decline, with USD/KRW climbing 0.8% amid weakness in Asian equity markets and growing investor caution.

The Australian dollar also weakened after disappointing domestic employment figures raised doubts about further Reserve Bank of Australia interest rate increases.

Australia unexpectedly lost 39,300 jobs in September, compared with forecasts for a 20,000 increase. The unemployment rate remained at 4.7%, its highest level in five years, while part-time employment dropped by 73,700 positions.

Following the weak labor market report, traders assigned approximately a 90% probability that the Reserve Bank of Australia would maintain its benchmark interest rate at 4.6% in November. The AUD/USD pair declined 0.3%.

Elsewhere, the Indian rupee weakened slightly as USD/INR rose 0.1%, while the Singapore dollar gained ground, sending USD/SGD down 0.2%.

Asian currency markets remain sensitive to U.S. inflation trends, Federal Reserve policy expectations, and regional economic developments.