Investing.com– Most Asian currencies strengthened on Friday after keen gains in the previous session, while the dollar pared some losses after the Federal Reserve cut interest rates, in line with broad expectations.

Regional currencies recovered most of their weekly losses following the Fed’s move, with some even turning positive during the week. On the other hand, the dollar fell from four-month highs, with some investors also holding on to recent gains.

There was also more focus on China’s fiscal stimulus signals as the National People’s Congress meeting entered its final day.

Dollar nurses fell from a 4-month high after the Fed cut interest rates

In Asian trade, both indexes strengthened after falling sharply on Thursday after the Fed’s decision to a range of 4.50% to 4.75%.

The dollar hit a four-month high earlier in the week following Donald Trump’s victory in the 2024 presidential election, with Trump’s policies potentially heralding more stiff inflation in the longer term.

The Fed said a change in U.S. leadership is unlikely to have an impact on monetary policy in the near term. Chairman Jerome Powell signaled that the economy was in good shape and that the bank was likely to ease policy further in the coming months.

Traders were pricing in a 76.5% chance that the Fed would cut interest rates by 25 basis points in December and a 23.5% chance that rates would remain unchanged.

Chinese yuan frail, NPC spotlight

The Chinese yuan – which has been one of the hardest hit by the dollar’s weakness this week – weakened slightly on Friday, with the pair rising 0.2%. The pair was also expected to rise 0.4% this week.

The main focus was on the NPC meeting, which ends on Friday, to get more clues about Beijing’s plans to introduce fiscal stimulus.

Analysts expect the government to approve at least 10 trillion yuan ($1.6 trillion) in fresh spending in the coming years. The NPC meeting comes after Beijing announced a series of stimulus measures last month but did not specify their timing or scale.

Broader Asian currencies were mostly weaker on Friday, but posted powerful gains from the previous session after the Federal Reserve cut interest rates.

The Japanese yen was an outlier, with the pair down 0.2% and away from three-month highs after Japanese ministers issued fresh verbal warnings over potential currency market intervention.

The Australian dollar pair fell 0.4% but was heading for a weekly gain of almost 2%. The South Korean won pair rose 0.4%, while the Singapore dollar pair rose 0.1%.

The Indian rupee lagged this week, with the pair rising to record highs above Rs 84.4. On Friday, the pair stayed close to these highs.