Asian Currencies Steady as Markets Eye Fed Cut Odds and Tokyo Inflation Data

Asian currencies traded mostly steady on Friday as global markets reacted to growing expectations of a U.S. Federal Reserve rate cut next month, while Japan’s inflation figures drew significant attention. The U.S. Dollar Index remained muted during Asian hours but was still on track for a notable weekly loss, with U.S. Dollar Index Futures also flat around 04:50 GMT.

Market sentiment shifted sharply after traders boosted the probability of a 25-basis-point Fed cut at the December 9–10 meeting to nearly 87%, compared to about 40% just a week ago. Softer U.S. economic data and cautious, dovish-leaning commentary from some Fed officials helped fuel the move. However, uncertainty persists as data releases remain sparse and policymakers continue to deliver mixed messages. Additional speculation over Kevin Hassett potentially being appointed as the next Fed Chair has stirred debate, as markets anticipate that his leadership could favor earlier monetary easing and stronger pro-growth measures—factors that typically weigh on the dollar.

Across Asia, currency movements were limited despite the softer greenback. The South Korean won edged 0.2% higher against the dollar, while the Singapore dollar held steady. The Indian rupee gained 0.1%, and the Malaysian ringgit remained stable. China’s onshore yuan also showed little change, and the Australian dollar traded flat.

In Japan, investors focused heavily on Tokyo’s inflation indicators. Tokyo CPI data once again exceeded the Bank of Japan’s 2% target, reinforcing expectations that the BOJ may consider another rate hike soon. Core inflation in the capital has stayed in the high-2% range, strengthening the case for near-term policy tightening and offering mild support for the yen, which dipped 0.1% against the dollar. Stronger-than-expected industrial output and retail sales added to confidence that Japan’s economy may withstand higher rates. ING analysts noted that sustained inflation above target and robust economic readings bolster the likelihood of a BOJ rate hike in December.