Asian Currencies Trade Sideways as Dollar Weakens Ahead of Key U.S. Data

Most Asian currencies traded within a narrow range on Tuesday, while the U.S. dollar remained under pressure as investors stayed cautious ahead of several crucial U.S. economic indicators, starting with the nonfarm payrolls report later in the day. The foreign exchange market showed limited risk appetite as traders positioned themselves for data that could influence global interest rate expectations and central bank policies.

The dollar index hovered near a two-month low in Asian trading, extending losses that began after the Federal Reserve recently cut interest rates and announced plans to buy $40 billion in short-term U.S. Treasuries each month. This move reinforced a dovish monetary policy outlook, as increased bond buying is expected to boost liquidity and keep borrowing costs contained. Market participants are now closely watching U.S. nonfarm payrolls for November and upcoming CPI inflation data, both of which are key inputs for the Fed’s data-driven approach to future rate decisions. Comments from Federal Reserve officials overnight further emphasized the importance of labor market and inflation trends.

Across Asia, currency movements were muted, although many currencies held modest gains accumulated over the past week due to dollar weakness. The Indian rupee stood out as the worst performer, sliding to a record low against the dollar. The USD/INR pair climbed to 91.083, reflecting sustained pressure on the rupee after softer domestic inflation data fueled expectations of additional interest rate cuts by the Reserve Bank of India. Ongoing uncertainty around U.S. trade tariffs also weighed on sentiment toward the Indian currency.

Elsewhere, the Chinese yuan and Singapore dollar posted marginal moves, while the Australian dollar eased slightly despite recent strength driven by speculation that the Reserve Bank of Australia could raise rates next year amid persistent inflation. The Japanese yen strengthened modestly, with investors bracing for potentially hawkish signals from the Bank of Japan as inflation remains sticky and the yen stays weak. Meanwhile, the South Korean won and Taiwan dollar weakened, pressured by capital outflows linked to heavy selling in local technology stocks.

Overall, Asian forex markets remained cautious, with global stock market weakness and upcoming central bank decisions keeping traders on edge.