Investing.com– Most Asian currencies gained on Friday as the dollar weakened on continued expectations of a U.S. Federal Reserve rate cut in December, while the Japanese yen rose on hotter-than-expected inflation data from Tokyo.

Traders strengthened their expectations for the Fed’s 25-basis-point cut at its December meeting, despite U.S. data earlier this week that showed the economy remained resilient and inflation remained unchanged.

In Asian trade, the indices and fell by 0.3%.

Investors turned to regional economic indicators for guidance when U.S. markets were closed on Thursday for the Thanksgiving holiday, resulting in lean volumes on the final trading day of the month.

In Japan, data showed rates rose more than expected in Tokyo in November, pointing to rising inflation pressures that have reinforced expectations that the Bank of Japan will raise interest rates in December.

The Japanese yen hit its highest level against the dollar in just over a month, with the pair falling almost 1%. The pair was expected to fall almost 3% this week.

Asia FX Braced for November Losses as Trump Strengthens Dollar

Most regional currencies strengthened on Friday but headed for monthly losses amid downward pressure from US Republican Donald Trump’s November 5 election victory. Trump has proposed increasing tariffs on China, reigniting fears of a global trade war that could have dire consequences for Asian economies that rely heavily on trade.

The onshore Chinese yuan pair fell 0.2%, slightly away from its four-month high. However, the pair is pegged for a monthly gain of 1.6%.

The Singapore dollar pair fell 0.2% while the Thai baht fell 0.5%. Both pairs were on track to gain almost 1.5% in November.

South Korea’s pair remained largely unchanged a day after a surprise move by Bank of Korea to start its second straight match. However, the won was expected to lose almost 1.6% against the dollar this month.

The Australian dollar pair rose 0.3% on Friday but was heading for a 1% monthly loss, while the Indian rupee pair was set to gain 0.5% in November.

The Fed will cut interest rates by 25 basis points in December

According to the CME Fed Watch Tool, investors now see a 67% chance the Fed will cut interest rates in December, up from 55% a week ago. This led to a short-term weakening of the dollar.

The dollar index is down almost 1.6% this week, including significant data. On Wednesday, data showed that the Fed’s preferred measure of core inflation rose in line with estimates. Another reading showed that the US economy was growing at a solid pace in the third quarter.

Combined with this data, the latest Fed minutes showed that policymakers supported a gradual easing of interest rates, raising questions about long-term policy, especially in the face of inflationary activity under Trump.