Asian Currencies Edge Higher as Markets Bet on December Fed Rate Cut

Asian currencies saw modest gains on Tuesday as growing confidence in a potential U.S. Federal Reserve rate cut in December supported regional sentiment. The shift in expectations helped several Asian units recover recent losses, even as the U.S. dollar held firm ahead of a series of key economic reports.

Markets have sharply increased bets that the Fed will lower interest rates at its December 9–10 meeting, with CME FedWatch now pricing in nearly an 80% chance of a 25-basis-point cut—up from just 40% a week earlier. Comments from multiple Fed officials signaling support for easing contributed to this turnaround. According to the Wall Street Journal’s Nick Timiraos, Fed Chair Jerome Powell appears to have enough backing for a December cut, although policymakers remain divided on the outlook for further reductions.

Despite the shift in rate expectations, the dollar index stayed above the 100 level as traders awaited fresh U.S. economic data. Upcoming releases include September’s producer price index and retail sales, followed by the PCE price index—widely regarded as the Fed’s preferred inflation measure. These will form the last major data inputs before the December meeting, especially with officials warning that October’s inflation and labor numbers may not be published due to an extended U.S. government shutdown.

The Chinese yuan strengthened slightly, with USD/CNY slipping 0.1% amid optimism over U.S.-China relations, boosted by news that U.S. President Donald Trump plans to visit Beijing in April. Meanwhile, the Japanese yen remained near 10-month lows above 156 per dollar, hovering close to levels that have triggered government intervention in the past. Tokyo issued repeated warnings about excessive yen weakness, though no direct action has been taken. Analysts note that meaningful yen recovery would require stronger fiscal discipline and continued policy normalization by the Bank of Japan.

Regional currencies traded narrowly, with the Australian dollar dipping 0.1%, the Indian rupee holding above 89 per dollar, and both the South Korean won and Singapore dollar remaining largely unchanged.