Asian currencies weakened against the U.S. dollar on Friday, with the New Zealand dollar falling to its lowest level since mid-August after the Reserve Bank of New Zealand delivered a smaller-than-expected rate hike.
The kiwi dropped 0.9% to 0.5843 per dollar, extending losses after the RBNZ raised its official cash rate by 25 basis points to 2.75%. The move reduced expectations for further tightening, with markets now pricing a lower probability of an October hike, according to ANZ analysts. The dollar index rose 0.12%, supported by rising U.S. Treasury yields, which reached 4.81%—the highest since late 2023.
The Federal Reserve’s policy outlook also bolstered the dollar. Markets increased the chance of a September rate hike to 68%, up from around 40% a week earlier, as U.S. data underperformed expectations. The July JOLTS job openings report and the August ISM manufacturing index both missed forecasts, reinforcing bets on tighter monetary policy.
The Japanese yen remained under pressure, trading at 160.21 per dollar, above the psychologically significant 160 level. Bank of Japan Governor Kazuo Ueda said the central bank would debate a rate increase at its September 17-18 meeting, but no immediate action was signaled. U.S. Treasury Secretary Scott Bessent called for "decisive" steps to address yen weakness, though no specific policy measures were outlined.
Other regional currencies showed mixed performance. The Australian dollar edged up marginally to 1.4006 per dollar, while the South Korean won fell 0.3% to 1,369.33. The Singapore dollar rose 0.05% to 1.2733, and the Malaysian ringgit gained 0.2% to 4.0441. The Indian rupee was little changed, down 0.04% at 94.916.
Global bond yields climbed to their highest levels since 2008, with Australia’s 10-year yield reaching 5.25%—its highest since July 2011. The Reserve Bank of Australia is expected to consider a rate hike at its September 29 meeting, with markets pricing a 58% chance of tightening.
