Asian Currencies Slip as Dollar Strengthens; Indian Rupee Rebounds on Intervention Hopes

Most Asian currencies edged lower on Wednesday as investors weighed the U.S. Federal Reserve’s future interest rate path following mixed signals from the latest U.S. labor market data. At the same time, the Indian rupee staged a sharp rebound from record lows, supported by growing expectations of central bank intervention to stabilize the currency.

The U.S. Dollar Index, which tracks the greenback against a basket of major global currencies, rose around 0.3% during Asian trading hours. Dollar Index futures were also higher, reflecting sustained demand for the U.S. currency as markets reassessed the outlook for U.S. monetary policy. The stronger dollar continued to pressure regional currencies, particularly those sensitive to capital flows and external demand.

The Indian rupee was a notable outlier, strengthening more than 1% after hitting successive record lows earlier in the week. The USD/INR pair fell sharply after reports that state-run banks were actively selling dollars, fueling speculation that the Reserve Bank of India had stepped in to curb excessive volatility. The rupee’s recent weakness has been driven by persistent foreign portfolio outflows, robust importer demand for dollars, and uncertainty surrounding U.S.-India trade relations. While intervention helped stabilize the currency in the short term, broader structural pressures remain in focus for investors.

Market sentiment was also shaped by fresh U.S. employment data released on Tuesday. Nonfarm payrolls showed modest job gains in November, while the unemployment rate climbed to its highest level since 2021. These figures reinforced expectations that the U.S. labor market is cooling, complicating the Federal Reserve’s policy outlook. Analysts noted that slowing job creation and rising unemployment could strengthen the case for interest rate cuts in the coming months, especially amid increasing political pressure ahead of U.S. elections.

Elsewhere in Asia, the Chinese yuan was largely stable, while the Singapore dollar weakened modestly. The Australian dollar slipped, reflecting both dollar strength and cautious risk sentiment. The Japanese yen also softened slightly against the dollar as traders looked ahead to an upcoming Bank of Japan policy meeting, where a potential rate hike could signal another step away from ultra-loose monetary policy and offer longer-term support to the yen.