Investing.com– Most Asian currencies fell on Thursday as the dollar held steady near a two-year high while the Indian rupee fell to an all-time low.

On Wednesday, most markets in the region were closed due to Christmas.

The rate was largely stable while Asian trade declined on Thursday.

Asian currencies weakened sharply last week after the Federal Reserve forecast fewer interest rate cuts in 2025, citing concerns about persistent U.S. inflation.

The Indian rupee has reached a record low, the dollar remains close to its highest level in 2 years

The Indian rupee fell to an all-time low against the US dollar, and on Thursday the pair hit a record high of 85,497 rupees, down 0.2%. Last week, the pair crossed the Rs 85 mark.

The onshore Chinese yuan pair strengthened on Thursday. Reuters reported on Tuesday that Chinese authorities have decided to issue a record 3 trillion yuan ($411 billion) in special government bonds next year as part of stepped-up fiscal efforts to stimulate the struggling economy.

The Singapore dollar pair rose by 0.1%, while the Australian dollar pair fell by 0.2%.

The South Korean won pair rose 0.4%, while the Philippine peso pair fell more than 1%, bucking the regional trend.

The US dollar has shown significant strength in recent months, supported by a combination of domestic and global factors.

One of the key factors was the stance of the Federal Reserve’s monetary policy, which, despite previous interest rate cuts, moved towards maintaining higher interest rates in 2025, with forecasts predicting only two cuts.

Additionally, expectations of potential tariffs under the novel Donald Trump administration have led to forecasts of higher inflation and mighty economic performance, further increasing the attractiveness of the dollar.

As expectations for the dollar to remain mighty, the outlook for Asian currencies has become cloudier amid global uncertainty.

The Japanese yen weakened amid bets on an interest rate hike

The Japanese yen pair remained largely unchanged on Thursday.

Japan’s government is preparing a record $735 billion budget for the fiscal year starting in April, driven by rising social security and debt service spending, according to a draft obtained by Reuters.

BOJ Governor Kazuo Ueda said on Wednesday that the economy is expected to make progress toward sustainably achieving the central bank’s 2% inflation target next year, suggesting an interest rate hike may be imminent.

The Bank of Japan ended negative interest rates in March and raised its short-term interest rate to 0.25% in July. It has shown a willingness to continue to raise interest rates if wage and price trends are consistent with its forecasts.