Asia FX steady as dollar holds near 18-mth high, U.S. CPI awaited
Asian currencies remained relatively stable on Tuesday as investors awaited key U.S. inflation data, with the U.S. dollar holding near an 18-month high due to elevated geopolitical risks boosting demand for safe-haven assets. The U.S. Dollar Index saw a slight decline of 0.2% to 102.44 by 23:55 ET (03:55 GMT), after reaching its highest level since April 2025 the previous day.
The greenback's strength was driven by expectations of higher U.S. interest rates compared to other economies, steady economic growth, and a preference for defensive currencies. Investors were particularly focused on the upcoming U.S. consumer price index report on Wednesday, which would provide insights into the Federal Reserve's monetary policy outlook.
Recent geopolitical tensions in the Middle East and Ukraine, along with elevated energy prices and Treasury yields, added to the dollar's support. The Japanese yen saw a minor decrease against the dollar, while the Chinese yuan's offshore and onshore USD/CNH and USD/CNY pairs remained relatively flat. The South Korean won showed a slight upward movement against the dollar after a dip on Monday, bucking the regional trend.
The Indian rupee, however, continued to attract attention after a significant recovery on Monday, marking its biggest single-day gain in six months. The Reserve Bank of India responded to the situation by intervening in the foreign exchange market and imposing tighter restrictions on certain derivatives transactions. Other currency pairs, such as the Singapore dollar and Australian dollar, remained relatively stable.
The Reserve Bank of Australia's September meeting minutes revealed policymakers' concerns about persistent inflation pressures, with the central bank raising its cash rate by 25 basis points to 4.60%, marking its fourth increase in a year.
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