Asian currencies extended losses Tuesday as the Japanese yen retreated from a seven-month high reached last week, while investors positioned ahead of the Federal Reserve’s policy decision on Wednesday and an anticipated Bank of Japan rate hike this Friday.
The dollar index held near 99.60, up 0.12%, while the yen slipped roughly 0.2% to 154.72 per dollar after surging to 152.89 last week — its highest level in seven months. Despite the pullback, the Japanese currency remains on pace for a month-to-date gain of about 4%.
Broader regional currencies followed the dollar higher. The South Korean won rose 0.6% to KRW1,354.84 against the dollar, the Singapore dollar gained 0.2%, the Malaysian ringgit rose 0.1%, and the Indonesian rupiah climbed 0.2% to IDR17,682.5. DBS expects the rupiah to trade within a 17,600–17,800 range. The Australian dollar settled around $0.7120 and the New Zealand dollar weakened to $0.5756. The European euro fell 0.11% to 1.1537 and the British pound slipped 0.12% to 1.3485.
Climbing oil prices and rising U.S. Treasury yields added pressure on import-dependent Asian economies and reinforced expectations that the Federal Reserve would resume its tightening cycle. According to the CME FedWatch tool, markets are pricing in approximately a 93% probability of a rate increase. DBS noted that traders should be cautious about chasing the dollar’s gains ahead of the Federal Open Market Committee meeting, observing that a hiking cycle is already heavily anticipated despite some risks of a hold. Two senior Fed officials had signaled a willingness to keep rates unchanged before the blackout period.
DBS senior economist Radhika Rao noted that other major central banks were also being priced for rate hikes similar to the Fed’s, but without the additional uncertainty tied to upcoming U.S. midterm elections. The anticipated BOJ move is widely expected to be a 25-basis-point increase, marking the bank’s first rate hike in more than three years.
In Indonesia, a cabinet reshuffle on Monday — featuring the appointment of Suahasil Nazara as finance minister, replacing Purbaya Yudhi Sadewa — drew mixed attention. Rao said the initial market reaction should be constructive, arguing that fiscal credibility underpins the bond market and rupiah while yields remain elevated and track U.S. bond markets.
Traders now look to Wednesday’s Fed announcement and Friday’s BOJ decision as the defining catalysts for currency direction across the region.
