Asian currencies traded mostly flat on Friday as the U.S. dollar weakened from an 18-month high, supported by falling Treasury yields and growing investor demand for safe-haven assets. Meanwhile, the Indian rupee emerged as the region’s strongest performer following intervention measures by the Reserve Bank of India (RBI).
The U.S. Dollar Index slipped 0.1% to 101.982 by 23:57 ET (03:57 GMT), putting it on course for a 0.2% weekly decline. This marked the dollar’s first weekly loss in five weeks after stronger-than-expected U.S. inflation data initially pushed the currency to its highest level since early 2025.
Declining U.S. Treasury yields pressured the greenback as investors shifted toward government bonds amid concerns over artificial intelligence investments and rising debt financing. The benchmark 10-year Treasury yield dropped to approximately 5.09% on Thursday, its lowest level since September 23.
Across Asian foreign exchange markets, the Japanese yen remained relatively stable, with USD/JPY heading for a 0.3% weekly decline. China's onshore and offshore yuan also showed limited movement, while USD/KRW gained 0.1%, positioning the South Korean won for a 0.2% weekly decline.
Investors continued monitoring Federal Reserve monetary policy expectations ahead of remarks from Fed Chair Kevin Warsh at an International Monetary Fund event in Bangkok. CME FedWatch data indicated a 28% probability of an October interest rate hike and a 66% chance of another increase in December.
The Indian rupee outperformed regional currencies, with USD/INR falling 0.2% below 95. The currency was positioned for a 1.9% weekly gain after approaching record lows near 97 against the dollar last week.
The RBI introduced restrictions targeting speculative dollar demand, including tighter foreign exchange derivatives requirements and a dedicated dollar-purchase facility for state-owned oil companies.
However, these measures disrupted rupee forward-market liquidity, increased hedging costs, and created uncertainty among traders, prompting the central bank to clarify certain regulations.
Elsewhere, the Australian dollar strengthened 0.3% against the greenback but remained on track for a 0.6% weekly loss. The Singapore dollar traded largely unchanged, reflecting cautious sentiment across Asian currency markets as investors assessed U.S. interest rate expectations and global financial risks.
