Asian currencies weakened amid Fed uncertainty, while the Japanese yen hovered near a 9-month low as fiscal concerns in Tokyo continued to rise.

Asian currencies weaken as unclear Fed signals dominate sentiment

Asian foreign-exchange markets opened Tuesday on a cautious note as most regional currencies slipped slightly. The decline was driven by rising uncertainty over whether the U.S. Federal Reserve will cut interest rates in December, dampening risk appetite across global markets.

Although the U.S. Dollar Index (DXY) edged down 0.1%, investor sentiment remained fragile amid mixed messaging from key Fed officials. Dollar Index Futures also traded 0.1% lower at 04:27 GMT, indicating a wait-and-see stance before crucial data releases.

Japanese yen hovers near 9-month low amid rising fiscal concerns

The Japanese yen remained the focus of traders as it continued to trade near its weakest level since February.
The USD/JPY pair dipped 0.2%, marking a modest rebound but not enough to alter the yen’s broader downtrend.

Key pressures include:

Long-term Japanese government bond yields climbing to multi-decade highs
→ The 20-year yield hit a record high, driving outflows from the yen.

Concerns over new fiscal policies under Prime Minister Sanae Takaichi
→ Markets expect the administration to unveil a large economic stimulus package.

According to Reuters, Goushi Kataoka, a private-sector member of a key government panel, said Japan needs around USD 149 billion in stimulus to support growth.

Other reports suggest the package may include:

Tax cuts to boost consumption

Measures to support businesses amid slowing domestic investment

However, these moves raise deeper concerns about Japan’s already massive public debt burden, the highest among developed economies.

Finance Minister Satsuki Katayama expressed alarm over the sharp currency fluctuations, stating that the government is “monitoring the markets with a high sense of urgency.”

Fed signals deepen global uncertainty

Mixed signals from Federal Reserve policymakers continued to unsettle global currency markets.

• Christopher Waller leans toward potential rate cuts

Speaking Monday, Waller noted that rate cuts could be justified if labor-market conditions continue to soften.
However, he emphasized that the Fed still lacks key data due to delays caused by the recent U.S. government shutdown.

• Other Fed officials remain cautious

Some policymakers warned that loosening policy too quickly may risk reigniting inflation.

This divergence in views has made it difficult for traders to forecast the Fed’s next move — a major driver of currency movements and capital flows across emerging Asian markets.

Backlog of U.S. data to be released this week

Part of the heightened volatility stems from a data backlog after the U.S. government shutdown halted several major releases.

The most anticipated among them:

September Nonfarm Payrolls report
→ Expected Thursday
→ Previously scheduled for last month but delayed
→ A pivotal indicator for the Fed’s December decision

Markets are also awaiting:

Wage growth figures

Unemployment data

Broader labor-market indicators

These updates will significantly influence Asian currency trends in the coming days.

Asian currency movements across the region

Beyond the yen, several Asian currencies continued to show weakness:

• South Korean won (KRW)

The USD/KRW pair rose 0.3%, reflecting equity-market outflows and broader risk aversion.

• Singapore dollar (SGD)

The USD/SGD pair traded flat, supported by Singapore’s disciplined monetary policy.

• Australian dollar (AUD)

The AUD/USD pair fell 0.4%, pressured by declining risk sentiment and Fed-driven rate expectations.

• Chinese yuan (CNY and CNH)

Both

USD/CNY (onshore) and

USD/CNH (offshore)
→ climbed 0.1%, mirroring concerns over China’s weak economic momentum and foreign-capital outflows.

• Indian rupee (INR)

The USD/INR pair remained largely unchanged, helped by regular intervention from the Reserve Bank of India to maintain stability.

Conclusion: Asia enters a period of heightened currency volatility

Tuesday’s trading session highlights that Asian currencies are entering a highly sensitive phase, shaped by:

Lack of clarity on Fed rate-cut timing

Growing fiscal concerns in Japan

Resumption of crucial U.S. economic data

Shifting global risk sentiment

Until the Fed delivers clearer guidance later this month, emerging-market currencies are expected to remain under pressure.

FAQs

1. Why did Asian currencies decline today?

Due to uncertainty surrounding potential Fed rate cuts and weaker investor risk appetite.

2. What caused the Japanese yen to hit a 9-month low?

Rising long-term bond yields, concerns about large-scale fiscal stimulus, and Japan’s heavy public-debt load.

3. Will the Fed cut rates in December?

Policymakers are divided. Labor-market data released this week will be crucial in determining the Fed’s next move.

4. Why did the AUD and KRW weaken more than other currencies?

Because these currencies are more sensitive to global risk sentiment and foreign-investment flows.