Investing.com– Asian currencies were broadly lower on Tuesday as markets remained cautious ahead of interest rate decisions by major central banks, including the U.S. Federal Reserve.
The Fed is expected to cut rates by 25 basis points on Wednesday but will signal a slower pace of monetary easing in 2025.
Expectations of a slower path to interest rate cuts strengthened the US dollar and created downward pressure on Asian currencies.
On Tuesday during Asian hours, the rate remained largely stable, although it was slightly higher.
Asia FX falls ahead of regional interest rate decisions
The Japanese yen pair remained largely unchanged. Reuters reported that the Bank of Japan is likely to remain unchanged this week, contrary to earlier expectations for a hike.
The Indonesian rupiah pair rose 0.4% as the country’s central bank is expected to keep its key interest rate unchanged on Wednesday to support the currency.
The Bank of Thailand is expected to keep its interest rate unchanged on Wednesday after an unexpected interest rate cut in October.
The Thai baht pair rose 0.2%.
In the Philippines, the peso pair fell 0.1% ahead of the Bangko Sentral ng Pilipinas (BSP) on Thursday. The central bank is expected to cut its key interest rates by 25 basis points for the third time in a row.
The dollar remains near a three-week high, putting pressure on Asian currencies
The dollar index reversed course to gain slightly and hovered near its highest level since Nov. 26, even as investors prepared for a Fed rate cut next week.
After Wednesday’s rate cut, the index shows the probability of one 25-basis-point cut or no further cuts in 2025 at about 37%, up from about 21% just a week ago.
In Asia, the onshore Chinese yuan pair rose 0.1%. Data on Monday showed China’s economic growth slowed sharply in November, highlighting continued weakness in consumer spending.
The South Korean won pair fell 0.2% amid ongoing political unrest in the country. On Saturday, South Korean President Yoon Suk Yeol was impeached in parliament over the imposition of martial law.
Otherwise, the Singapore Dollar pair rose slightly, while the Australian Dollar pair declined slightly.
The Indian rupee pair surged to an all-time high of Rs 84,918.
