The Indian rupee weakened past the 91 per USD threshold on Tuesday, extending its run of record lows for a fourth straight session, pressured by hedging activity and ongoing foreign outflows amid stalled US-India trade talks. The currency has dropped more than 6% this year, making it one of the worst-performing emerging market currencies, as steep US tariffs weigh on trade and investment flows. Overseas investors have sold over $18 billion of local equities in 2025, heading toward the largest annual outflows on record. While state-run banks intervened with dollar sales to ease pressure from maturing NDF positions, analysts say the rupee is unlikely to recover until there is progress in trade negotiations. India’s trade secretary said on Monday that the country is engaging with the US to see if a deal can be reached “sooner than later.” Meanwhile, a rebound in exports in November has eased pressure, with shipments to the US rising and the trade deficit narrowing to a five-month low.

Indian Rupee Slips Past 91 Level

The Indonesian rupiah slipped toward IDR 16,690 per dollar on Tuesday, extending losses from the prior session as Bank Indonesia kicked off its two-day policy meeting. Markets widely expect the central bank to hold key rates for a third straight meeting, but officials have maintained a dovish bias after delivering a total 150bps cut since September 2024. Governor Perry Warjiyo said any further easing would depend on domestic and global conditions, noting that domestic inflation will stay within BI’s target range through 2026. While liquidity in the banking system remains ample, weak credit demand, evidenced by loan growth easing to 7.36% in October from 7.7% a month earlier, reinforced bets that policy support may be needed if growth fails to accelerate, weighing on the rupiah. The currency has fallen about 3.7% this year, placing it among the weakest performers in Asia. Globally, the dollar index hovered near two-month lows ahead of the delayed U.S. jobs report and November CPI data.

Rupiah Extends Drop as Policy Meeting Begins

The offshore yuan strengthened to around 7.04 per dollar, reaching a fresh fifteen-month high amid growing calls for a stronger currency to support economic rebalancing. The move comes as a rare public debate gains traction in China, with economists and former policymakers arguing the yuan remains too weak relative to fundamentals and that modest appreciation could help shift growth away from exports and toward domestic demand. While authorities continue to stress currency stability, softer recent data, highlighting fragile consumption, weak investment, and a deepening property downturn, has added pressure on policymakers and reinforced expectations for further policy support, alongside forecasts for gradual gains in the yuan over the year ahead. Elsewhere, a weaker US dollar added further support amid caution over upcoming key economic data delayed by the government shutdown.

Offshore Yuan Hits Fresh 15-Month Peak

The Australian dollar depreciated past $0.662 per US dollar, marking its fourth consecutive session of losses as investors weighed weak economic data. The Westpac-Melbourne Institute Consumer Sentiment Index slumped by 9% month-on-month in December 2025, sliding back below the 100 mark after briefly returning to positive territory in the previous month. Inflation emerged as the primary concern, with Westpac noting that consumer price index readings have exceeded expectations for roughly four consecutive months. This persistent price pressure has contributed to heightened caution among consumers regarding interest rates, particularly after the Reserve Bank of Australia indicated last week that it is likely done cutting rates. Meanwhile, flash data showed the Composite PMI dipping to a seven-month low of 51.1 in December. Growth in the services sector slowed to 51 from 52.8, while manufacturing activity showed modest improvement, rising to 52.2 from 51.6.

Australian Dollar Falls on Weak Data

The dollar index hovered around 98.3 on Tuesday, remaining near two-month lows as investors positioned ahead of the combined October and November jobs report, which was delayed by the government shutdown. Retail sales data and preliminary manufacturing indicators are also due later today, while the November consumer price index will be released on Thursday. The upcoming labor market data is expected to provide fresh insight into employment conditions in recent months and could influence expectations for Federal Reserve monetary policy next year. Markets are currently pricing in a 75.6% probability that the Fed will keep rates unchanged at its January meeting. Traders also weighed declining odds that Kevin Hassett could replace Powell, following reports that President Trump’s advisers are instead backing candidates perceived as more independent. Elsewhere, investors are preparing for a series of policy decisions from other major central banks this week, including the BOJ, BOE and ECB.

Dollar Pressured Ahead of Payrolls Report

USDTRY increased to an all-time high of 42.71. Over the past 4 weeks, US Dollar Turkish Lira gained 1.01%, and in the last 12 months, it increased 22.02%.

Turkish Lira Hits All-time Low

The Canadian dollar strengthened past 1.38 per US dollar to a three-month high as markets weighed a steady Bank of Canada against a softer US policy outlook. Headline CPI holding at 2.2% and the trimmed-mean easing to a ten-month low of 2.8%, reinforcing the view that price pressures are converging toward the BoC’s target without forcing an abrupt policy pivot. Against that backdrop, the Bank of Canada’s decision to hold rates at 2.25% and its assessment that policy is “about the right level” curbed expectations for aggressive near-term easing, stabilizing Canadian rate differentials and supporting CAD demand. In contrast, while the US Fed formally projected only one additional cut next year, Chair Powell’s remarks on whether to pause or cut “a little” or “more than a little” were interpreted as leaving the door open to further easing, prompting markets to lift the probability of two or more cuts in 2026 to over 50% and narrowing US Canada yield spreads in favor of the loonie.

Canadian Dollar at 3-Month High

The British pound traded little changed near $1.34, continuing to benefit from broad US dollar weakness as traders prepared for the Bank of England’s monetary policy decision later in the week. The central bank is widely expected to cut the key bank rate by 25 basis points to 3.75%, bringing it to the lowest level since 2022, as rising unemployment and the UK’s stagnating economy ease inflationary pressures. However, fresh economic data, due ahead of the central bank’s decision, will help shape the monetary outlook for 2026, including reports on wage growth and inflation, both of which are expected to have slowed. Market participants continue to price in the possibility of one or two further rate cuts next year, with expectations likely to be influenced by these upcoming data releases.

British Pound Little Changed at $1.34

The Canadian Dollar touched 1.38 against the USD, the highest since September 2025. Over the past 4 weeks, US Dollar Canadian Dollar lost 2.14%, and in the last 12 months, it decreased 3.42%.

Canadian Dollar Hits 12-week High

The Indonesian rupiah weakened toward IDR 16,660 per dollar on Monday after firming around IDR 16,620 in the prior session, weighed by modest foreign capital outflows in the second week of December and growing caution ahead of Bank Indonesia’s final policy decision of the year later this week. While the central bank is expected to keep interest rates unchanged for a third meeting, policymakers have recently signaled room for more easing to support economic growth, following a total 150bps of rate cuts over the past year. Still, further downside was capped by signs of improving domestic demand, with retail sales for November expected to rise and consumer mood showing improvement during the month. On the external front, the US dollar index held losses, as markets stayed cautious ahead of key U.S. economic data releases delayed by the government shutdown, alongside lingering uncertainty over Fed leadership risks heading into next year.

Rupiah Eases Slightly

The Indian rupee slid past 90.6 per dollar, continuing to set fresh record lows, pressured by the absence of a trade deal with the US amid prolonged negotiations and persistent foreign outflows from local equities and bonds. The currency has fallen 5.5% this year, making it Asia’s worst performer, hurt by steep US tariffs that have weighed on exports and dampened investor interest in local markets. Overseas investors have offloaded more than $18 billion in stocks so far in 2025, with over $500 million in bond sales in December alone. Investor sentiment has also been weighed down by remarks suggesting a US trade agreement is unlikely before March, while talks with the EU also appear stalled. Meanwhile, November's inflation edged up to 0.71%, still well below the RBI’s 2% lower threshold, leaving room for potential rate cuts in 2026. Market focus now turns to India’s November trade data, expected to show a $32 billion goods deficit, down from a record high of $41 billion in October.

Rupee Continues Record Decline

USDINR increased to an all-time high of 90.78. Over the past 4 weeks, US Dollar Indian Rupee gained 2.41%, and in the last 12 months, it increased 6.94%.

Indian Rupee Hits All-time Low

The offshore yuan appreciated to around 7.05 per dollar, hitting its highest level since late September last year despite a raft of disappointing economic data. November figures showed momentum cooling, with retail sales growth slowing sharply and falling well short of forecasts, underscoring persistent weakness in consumption. Industrial output also eased slightly from the previous month and missed expectations, while fixed-asset investment contracted more than anticipated, marking its deepest downturn since the pandemic period. The prolonged property slump remained a major drag, with real estate investment falling at a faster pace and home price declines intensifying across major cities. However, economists said the deterioration in investment and housing conditions reinforced expectations for additional fiscal and monetary support early next year. Elsewhere, the yuan found support from a weaker US dollar, after the Fed cut rates and signaled a less hawkish path than anticipated.

Yuan Hits 15-Month High Despite Weak Data

The New Zealand dollar fell to around $0.578, retreating from a more than two-month high, after the Reserve Bank signaled it is likely to keep the official cash rate unchanged for some time. Governor Anna Breman said this outlook assumes economic conditions evolve as expected. She added that the forward path published in the November Monetary Policy Statement still indicates a slight probability of another rate cut in the near term, while noting that financial conditions have tightened more than projected. This dampened expectations for a rate hike, which markets had been pricing in from the third quarter next year. Breman said the economy is broadly tracking the RBNZ’s expectations and inflation is on course to reach the 2% target by mid-2026. Losses were somewhat limited by ongoing softness in the US dollar after the Federal Reserve signaled a less hawkish path than markets had anticipated.

New Zealand Dollar Retreats

The South Korean won weakened to around 1,477 per dollar on Monday, marking its lowest level in over eight months amid persistent capital outflows, prompting authorities to signal intervention. The finance ministry and Bank of Korea convened an emergency inter-agency meeting over the weekend to discuss measures amid recent swings, while the Financial Services Commission vowed “bold, preemptive actions” if required. Market participants continue to price in elevated risk as the won remains at psychologically sensitive levels, prompting concerns over potential spillovers to bond and equity markets. Meanwhile, South Korean equities opened sharply lower, with the KOSPI falling 2.1% in early trade as heavyweight tech shares, including Samsung Electronics and SK hynix, retreated following renewed US AI-sector caution. The equity selloff added pressure on the won, as foreign investors adjusted positions and hedged currency exposure.

South Korean Won Hits Over 8-Month Low

The Japanese yen rose to around 155.5 per dollar on Monday, reversing the previous session’s losses as investors prepared for the Bank of Japan’s policy meeting this week. The central bank is widely expected to raise its policy rate by 25 basis points to 0.75%. Market attention will focus on Governor Kazuo Ueda’s post-meeting remarks for guidance on next year’s policy trajectory, with analysts anticipating the policy rate could reach 1% by July. Expectations for tighter policy have been supported by robust domestic economic data, including consumer inflation remaining above historical levels. Reports also suggest that senior officials in Prime Minister Sanae Takaichi’s cabinet are unlikely to oppose a rate hike, citing concerns that a weak yen, partly due to delayed BOJ tightening, is driving higher import costs and inflation. Additionally, central bank data showed sentiment among large manufacturers rose to +15 in Q4 from +14 in Q3, marking the highest reading in four years.

Yen Edges Higher Ahead of BOJ Meeting

The dollar index held around 98.4 on Monday after declining for three straight weeks as investors prepared for key US data releases this week that were delayed by the government shutdown. November nonfarm payrolls are scheduled for release on Tuesday, alongside October retail sales, followed by the November consumer price index on Thursday. Last week, the Federal Reserve cut interest rates by 25 basis points but signaled a less hawkish path than markets had anticipated. Cleveland Fed President Beth Hammack indicated a preference for slightly more restrictive rates to keep inflation under control, while Chicago Fed President Austan Goolsbee projected more rate cuts in 2026 than many of his colleagues. Meanwhile, President Donald Trump stated on Friday that he is considering either former Fed Governor Kevin Warsh or economic adviser Kevin Hassett to lead the central bank next year.

Dollar Holds Losses Ahead of Data Releases

The Israeli New Sheqel touched 3.18 against the USD, the highest since April 2022. Over the past 4 weeks, US Dollar Israeli New Sheqel lost 0.5%, and in the last 12 months, it decreased 10.89%.

Israeli New Sheqel Hits 3-year High

The South Korean Won touched 1480.00 against the USD, the lowest since April 2025. Over the past 4 weeks, US Dollar South Korean Won gained 0.6%, and in the last 12 months, it increased 3.06%.

South Korean Won Hits 35-week Low

The dollar index hovered near two-month lows around 98.3, booking a third consecutive weekly decline, as investors digested Federal Reserve comments and reassessed the 2026 rate outlook. The Fed cut rates by 25bps to 3.50%–3.75% this week, marking its third consecutive reduction, while maintaining expectations for just one more cut next year. Kansas City Fed President Jeffrey Schmid, a dissenter, warned that inflation remains “too hot” and said policy should stay moderately restrictive. Chicago Fed President Austan Goolsbee also opposed the cut, preferring to wait for more inflation data, though he expects more rate reductions in 2026 than most colleagues. Philadelphia Fed President Anna Paulson, who will join the FOMC voting rotation next year, took a more dovish stance, citing labor market weakness as a greater concern than rising inflation. Global developments also pressured the greenback, with hawkish moves in Australia, Canada, and Europe, leaving the dollar set to weaken broadly.

Dollar Near Two-Month Lows Amid Fed Comments

The South African rand traded below 16.9 per USD, the highest level since January 2023, supported by higher prices of precious metals, particularly gold. Meanwhile, traders positioned themselves for a busy week of economic data, with the main focus on November inflation data due on December 17. Latest data showed South African inflation expectations have dropped sharply following the Finance Minister Enoch Godongwana’s lowering of the inflation target, opening the door for further interest rate cuts. The currency has gained over 10% against the greenback this year, helped by an improving fiscal and economic backdrop, moderating inflation and elevated commodity prices, especially gold and platinum.

South African Rand at Near 3-Year High

The rupee slipped past 90.6 per USD, hitting a fresh all-time low, pressured by the absence of a trade deal with the US amid prolonged negotiations and continuous withdrawal of foreign funds. The currency has slid over 5% this year, making it Asia’s worst performer, as steep US tariffs weighed on exports. Ongoing talks remain central to the outlook, with Prime Minister Narendra Modi speaking with President Donald Trump this week, as New Delhi seeks relief from up to 50% US tariffs on some Indian goods. Meanwhile, India’s consumer price inflation accelerated to 0.71% in November, from October’s record low of 0.25% and broadly matching the market consensus of 0.7%. Despite the uptick, inflation remained below the Reserve Bank of India’s lower tolerance threshold of 2% for the third straight month, leaving scope for further interest rate cuts in 2026.

Rupee Slips to New Record Low

The British pound edged slightly lower to below $1.34 after fresh data showed the UK GDP unexpectedly contracted by 0.1% in October, marking the fourth consecutive month without growth and defying expectations for a 0.1% increase. Despite the soft data, sterling remains near two-month highs and is on track for a 0.5% weekly gain, supported by broad dollar weakness after the Federal Reserve cut the fed funds rate by 25 bps as expected this month and signalled it still anticipates one more rate cut next year. Looking ahead, the Bank of England meets next week, with investors assigning nearly a 90% probability of a 25 bps cut to 3.75%. Such a move would mark the fourth rate reduction this year and bring borrowing costs to their lowest level since 2022.

British Pound Edges Down After Weak GDP Data

The Indonesian rupiah strengthened to around 16,630 per dollar on Friday, swinging from a slight dip in the prior session as the dollar index hovered near two-month lows. The U.S. Fed’s third rate cut of the year, accompanied by a less hawkish outlook than markets expected, boosted demand for emerging-market currencies. Bets also grew that Bank Indonesia will keep its policy rate at next week’s final meeting of the year, leaving room to resume easing in 2026. Meanwhile, Indonesia’s retail sales are projected to extend gains in November after October’s acceleration, lifted by stronger holiday spending. On the trade front, Jakarta seeks to finalize tariff negotiations with the U.S. by year-end following talks between chief negotiator Airlangga Hartarto and U.S. Trade Representative Greer to advance July’s preliminary deal. Still, the rupiah remains down about 3.5% year-to-date, pressured by inflation risks tied partly to logistics disruptions after the recent disaster in Sumatra.

Rupiah Firms on Softer Dollar

The offshore yuan traded around 7.05 per dollar on Friday, hovering near its strongest level in more than a year, buoyed by renewed assurances from Chinese authorities on currency stability. At the annual Central Economic Work Conference, policymakers reaffirmed their commitment to maintaining the yuan basically stable at reasonable and balanced levels. They also underscored plans to maintain a “proactive” fiscal stance in the year ahead, outlining measures to boost both consumption and investment to support steady economic growth. Externally, the yuan drew further support from a softer greenback after the Fed cut interest rates by 25 bps, with Chair Jerome Powell indicating that additional rate hikes have effectively been taken off the table. For the week, the yuan is on track for its biggest weekly gain since October. The yuan also appreciated almost 3.5% against the greenback this year and appears on track for its strongest yearly advance since 2020.

Offshore Yuan Trades Near 14-Month High

The South Korean won slipped to around 1,472 per dollar, approaching seven-month lows, as persistent capital outflows were driven by domestic investors increasing overseas equity holdings. The currency has fallen roughly 5% against the dollar this quarter, approaching a 16-year low, highlighting ongoing pressures on the FX market. Investor caution heightened as import prices rose at the fastest pace in 19 months in November by 2.6% month-on-month, up from 1.9% in October, reflecting the impact of the weaker won on import costs. Amid these conditions, Kim Jong-hwa, a central bank board member, warned that exporters without adequate currency hedges and smaller businesses unable to pass on higher import costs face significant challenges. Separately, concern was tempered as the Ministry of Economy and Finance reported a recovering economy, with the monthly Green Book noting three months of improvement in consumption and exports.

Korean Won Falls on Weaker FX Sentiment

The Japanese yen held around 155.6 on Friday after two consecutive sessions of gains, supported by speculation that the Bank of Japan may raise interest rates next week and continue tightening into 2026. Earlier this week, Governor Kazuo Ueda noted that the central bank is getting closer to its inflation target, signaling the potential for a near-term rate hike. Investors will also focus on Ueda’s post-meeting remarks for guidance on next year’s policy. Reports indicate that top officials in Prime Minister Sanae Takaichi’s cabinet are unlikely to oppose a rate increase, citing concerns that a weak yen, largely due to delayed BOJ tightening, is driving higher import costs and inflation. The yen has also benefited from broad dollar weakness after the US Federal Reserve cut rates as expected and delivered a less hawkish outlook than markets anticipated.

Yen Holds Gains as BOJ Outlook Mulkled

The dollar index hovered near two-month lows around 98.3 on Friday and was on track for a third consecutive weekly drop. The decline came as the Federal Reserve cut interest rates as expected and delivered a less hawkish outlook than markets anticipated. Chair Jerome Powell indicated that further rate hikes are unlikely, with Fed projections pointing to a single reduction next year. The Fed also announced plans to buy short-dated Treasury bills to support market liquidity, pushing yields lower and adding pressure on the dollar. Meanwhile, initial jobless claims rose by the most in nearly four and a half years last week, reinforcing a dovish rate outlook. In contrast, other major economies, including Australia, Canada, and Europe, are seeing hawkish repricing, further weighing on the greenback. The dollar is poised to weaken against most major currencies this week, with the steepest losses expected versus the euro.

Dollar Set for Third Straight Weekly Decline

The Mexican peso has strengthened toward 18 per US dollar, pushing back to July 2024 highs as the dollar softened after the Federal Reserve cut rates and signalled a more dovish path, while investors dialed back expectations for the timing and scale of further easing by the Bank of Mexico following recent price data. The Fed’s 25 basis point move and its plan to buy about $40 billion of short dated Treasuries tightened money market conditions and reinforced bets on more easing next year. Domestically, November headline inflation surprised on the upside at 3.80% year on year and core inflation re accelerated to about 4.43% year on year, a mix that raises the bar for rapid cuts even as growth remains weak. Banxico has already eased policy from earlier peaks but is proceeding meeting by meeting, which keeps real Mexican policy rates relatively attractive versus expected US levels and supports peso inflows tied to yield differentials.

Mexican Peso Hits July 2024 Highs

The dollar index fell to 98.35 on Thursday, an eight-week low, after softer US data that showed initial jobless claims rising more than expected in the week of December 6. The Federal Reserve delivered its third-quarter-point rate cut this year and signaled a less hawkish outlook than markets had anticipated. Traders held to expectations of two cuts in 2026, even though the Fed’s projections pointed to only one. The central bank also announced it will begin buying short-dated Treasury bills to support market liquidity starting December 12, with the initial round totaling approximately $40 billion. Meanwhile, Fed projections now anticipate 2.3% economic growth in 2026, up from 1.8% in September, with 2027 growth at 2%, slightly above prior forecasts. Inflation forecasts were lowered to 2.5% for 2025 and 2.4% for 2026, remaining modestly above the 2% target.

DXY Falls to 8-Week Low

The Brazilian real appreciated to about R$5.44 per US dollar, paring much of the politically driven plunge after Copom’s decision and commentary recast the interest rate outlook and revived carry demand. Copom held the Selic at 15% and delivered a noticeably tougher tone that flagged upside risks to inflation and set a high bar for cuts, which keeps policy on a longer hold path and preserves attractive real rates for yield sensitive investors. November inflation eased to 4.46% year on year, the lowest since September 2024, a development that improves the path toward eventual cuts but is not decisive enough to force immediate easing and so reinforces the central bank’s caution. Reports that the most disruptive political scenarios had softened trimmed the fiscal credibility shock that sparked the initial selloff. Meanwhile, Chair Powell’s remarks were taken as modestly dovish and traders lifted the odds of two or more cuts in 2026 to about 68% which narrowed US Brazil yield gaps.

Brazilian Real Rebounds After BCB

The Turkish lira continued to weaken, hitting fresh record lows above 42.6 per US dollar in December and extending its year-to-date decline to roughly 23%. The currency’s gradual, managed depreciation, ongoing since July 2023, has persisted amid renewed concerns over the country’s political outlook, which continue to dampen investor sentiment. Markets are also watching closely for the announcement of the 2026 minimum-wage increase later this month, as it could influence next year’s inflation dynamics. Turkey’s inflation eased more than expected to 31.07% in November, the lowest level since November 2021. The central bank expects inflation to end 2025 at around 31% and maintained its 2026 forecast at 16%. In December 2025, the monetary authority delivered a fourth consecutive rate cut, reducing borrowing costs by 150 bps, larger than the 100 bps move anticipated by most investors.

Turkish Lira Above 42.6

The Swiss franc edged higher to around 0.799 per USD, hovering near the highest since 2011, after the Swiss National Bank kept interest rates unchanged at 0% for a second straight meeting, as widely expected. The central bank also said the economic outlook has improved slightly following a recent deal to lower US tariffs on Swiss goods.

Swiss Franc Firms Slightly

USDINR increased to an all-time high of 90.56. Over the past 4 weeks, US Dollar Indian Rupee gained 2.2%, and in the last 12 months, it increased 6.72%.

The Indian rupee weakened past 90 per USD, hitting another fresh record low, pressured by corporate dollar outflows, which added to concerns over the absence of a US-India trade deal. The outflows were driven by Indian companies buying dollars for end-of-year international payments, alongside demand from foreign and local private lenders likely linked to merchant transactions. These limited relief from a softer greenback following the US Fed’s rate cut and less-hawkish-than-expected comments. On the trade front, India’s Commerce Secretary Rajesh Agrawal met US Deputy Trade Representative Rick Switzer in New Delhi for two days of discussions aimed at easing trade tensions, including tariffs related to Russian oil purchases. However, analysts warn that losses in the rupee could deepen if a trade agreement fails to materialize. The currency is on track for its worst annual decline since 2022, pressured by weak portfolio inflows and steep US tariffs on Indian exports.

Indian Rupee Hits Fresh Record Low

The Philippine peso rose to around 59 per dollar, rebounding slightly from record lows, after the Bangko Sentral ng Pilipinas delivered an expected rate cut but signaled it could be the final move in the current easing cycle. BSP Governor Eli Remolona said domestic demand is set for a gradual recovery, adding that any further easing would likely be limited and guided by incoming data. The BSP has cut borrowing costs by 125 bps this year, providing support to consumption and investment. However, a graft scandal involving billions earmarked for flood control projects has restrained state spending, which accounts for about 20% of GDP. The central bank also highlighted a weakened domestic growth outlook, noting that business sentiment remains subdued amid governance concerns and ongoing global trade uncertainties. Still, domestic demand is expected to recover gradually as the effects of monetary easing take hold and public spending improves in both pace and quality.

Philippine Peso Gains as BSP Signals End of Cuts

The Indonesian rupiah slipped to around 16,670 per dollar on Thursday after rising toward 16,630 in the previous session, weighed by modest foreign outflows in early December and cautious sentiment ahead of next week’s final monetary policy decision. Bank Indonesia has signaled potential further rate cuts to support economic growth after back-to-back pauses in October and November, following 150bps of reductions over the past year. The dovish stance has raised concerns over growing inflation risks, particularly from disrupted logistics after the late-November natural disaster in Sumatra Island. Stronger retail sales growth in October and improved consumer sentiment in November helped cap further weakness in the local currency, while forex reserves rose for a second month in November to the highest since August. Globally, the dollar index hovered at a seven-week low after the U.S. Fed delivered its third 25bps cut this year, despite signaling only one more reduction in 2026.

Rate Risks, Natural Disasters Weigh on Rupiah

The offshore yuan steadied around 7.06 per dollar, hovering near its strongest levels in more than a year, supported by broad weakness in the greenback. The US dollar remained under pressure after the Federal Reserve delivered a 25bps rate cut, with Chair Jerome Powell also signaling that a rate hike has been ruled out. Meanwhile, the People’s Bank of China set the daily midpoint at 7.0686 per dollar, its firmest level since October 2024 but 161 pips weaker than Reuters’ estimate. The central bank has been gradually strengthening its official guidance since late April, signaling a cautious openness to further currency appreciation. As a result, the yuan has gained 3.4% year-to-date and is on track for its strongest annual performance since 2020. Market attention is now turning to the upcoming Central Economic Work Conference, where Chinese policymakers are expected to set growth targets for next year and outline key priorities shaping China’s 2026 economic agenda.

Offshore Yuan Steady

The New Zealand dollar slipped to $0.579 but stayed close to a two-month high, amid expectations that the Reserve Bank of New Zealand’s easing cycle may be over. While the central bank cut its cash rate by 25bps last month, its updated projections suggested limited scope for further easing, implying only about a 20% probability of another cut next year as inflation pressures cool and the economic outlook improves. Meanwhile, RBNZ Governor Anna Breman on Wednesday emphasized a continued focus on data dependency and policy flexibility as economic conditions evolve. Currently, markets anticipate that the central bank’s next move will be a rate hike, though not until late 2026. The kiwi also received additional support from a weaker US dollar after the Federal Reserve lowered interest rates by 25bps and presented a less hawkish outlook than some had expected.

New Zealand Dollar Hovers Near 2-Month High

The South Korean won appreciated to around 1,466 per dollar on Thursday, gaining traction after stabilizing for two consecutive sessions as government efforts to ease concerns over capital outflows continued to support the currency. After the Ministry of Trade, Industry, and Resources unveiled a modular trade agreement framework, focus returned to the FX market, with the National Pension Service expected to become more active should the won approach 1,480 to 1,500. Optimism was bolstered as confidence grew in additional foreign exchange management measures. Adding to the momentum, exports surged 17.3% year-on-year in the first 10 days of December, driven by robust global demand for semiconductors, with shipments reaching $20.58 billion, up from $17.54 billion a year earlier. Separately, sentiment was also supported as the US central bank lowered its key interest rate to 3.5–3.75 percent, narrowing the gap between US and South Korean key rates to as much as 1.25 percentage points.

South Korean Won Strengthens on FX Measures, Trade Gains

The Japanese yen strengthened toward 155.5 per dollar on Thursday, extending gains from the previous session as the dollar weakened sharply after the US Federal Reserve delivered its third rate cut of the year and signaled a less hawkish outlook than markets anticipated. Investors are also eyeing next week’s Bank of Japan policy meeting, where markets anticipate a rate hike after Governor Kazuo Ueda said the central bank is getting closer to attaining its inflation target. Attention will focus on Ueda’s post-meeting comments for guidance on 2026 policy. Despite recent gains, the yen remains pressured by Japan’s slow growth, fiscal challenges, and wide interest rate gaps with other major economies, as domestic rates remain among the lowest globally. On the data front, business sentiment among large manufacturers rose to a one-year high in the three months to December.

Yen Gains on Dollar Weakness

The Australian dollar held steady around $0.667 on Thursday, trading near a three-month high, as investors weighed the latest labor market figures for clues on the Reserve Bank’s policy direction. The economy unexpectedly lost 21,300 jobs in November, driven entirely by full-time positions, while fewer people entered the workforce, keeping the unemployment rate steady at 4.3%. The softer-than-expected data suggest a gradual easing in the labor market, prompting traders to push back expectations for rate hikes to the second half of 2026, from earlier bets on May. However, the central bank still views the labor market as tight, pointing to high job vacancies, widespread staffing shortages, rising labor costs, and indicators that the economy remains near full employment. Elsewhere, the Aussie found support from a weaker US dollar after the Federal Reserve lowered rates by 25 basis points, while Chair Powell’s post-meeting comments surprised markets expecting a more hawkish tone.

Australian Dollar Steady at 3-Month High

The dollar index slipped to around 98.5 on Thursday, its lowest in over seven weeks after the Federal Reserve delivered its third quarter-point rate cut this year, in line with expectations. The Fed also signaled a less hawkish outlook than markets had anticipated and Chair Jerome Powell suggested a rate hike is off the table, prompting traders to price in two additional rate cuts in 2026. However, the Fed’s dot plot points to just one more 25-bps reduction next year. The central bank also announced it will begin buying short-dated Treasury bills to support market liquidity starting December 12, with the initial round totaling approximately $40 billion. Meanwhile, Fed projections now anticipate 2.3% economic growth in 2026, up from 1.8% in September, with 2027 growth at 2%, slightly above prior forecasts. Inflation forecasts were lowered to 2.5% for 2025 and 2.4% for 2026, remaining modestly above the 2% target.

Dollar Languishes on Dovish Fed Outlook

The Chinese Yuan touched 7.05 against the USD, the highest since October 2024. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.81%, and in the last 12 months, it decreased 3.04%.

Chinese Yuan Hits 14-month High

The Canadian dollar appreciated past 1.38 per US dollar, reaching twelve-week highs as markets balanced the anticipated Fed cut with a relatively hawkish Bank of Canada stance and firmer domestic data. The market focus shifted to the US Fed guidance which leaned more hawkish as the committee pencilled in only one additional cut next year, yet Powell’s discussion about whether to stop now or to cut “a little” or “more than a little” was seen as leaving the door open to further easing and pushed traders to lift the odds of two or more cuts in 2026 to about 68% which narrowed US Canada yield gaps. Earlier, the BoC left the policy rate at 2.25% and reiterated that the current stance is about right after a surprising Q3 GDP print of 2.6% annualized and a tighter labour market with unemployment near 6.5% which reduces near term easing odds and supports CAD.

Canadian Dollar Strengthens to 12-Week Highs

GBPUSD increased to 1.34, the highest since October 2025. Over the past 4 weeks, British Pound US Dollar gained 1.76%, and in the last 12 months, it increased 4.95%.

British Pound Hits 7-week High

The British pound surged past $1.33, hovering at its strongest level since October 22, supported by broad dollar weakness and diminished expectations for further Bank of England easing in 2026. The US Federal Reserve delivered the anticipated rate cut while signaling a likely pause in January as policymakers await additional data to assess the economic outlook. Expectations for next week’s BoE decision remain largely unchanged, with roughly an 84% chance of a rate cut priced in, despite signs of accelerating wage growth and persistent inflationary pressures. Markets are now almost fully pricing in a second 25-basis-point cut by June, with about a 75% probability of it occurring in April. Investors now await key UK monthly GDP data due on Friday, which could further influence market expectations.

Pound Climbs Above $1.33

The euro climbed toward $1.17, bolstered by broad dollar weakness, firmer rhetoric from European Central Bank officials, and progress on France’s 2026 social-security budget. The US Federal Reserve delivered the expected rate cut while signaling a likely pause in January as policymakers await additional data to assess the economic outlook. Meanwhile, investors pared back expectations for additional ECB easing after officials signaled that further cuts may not be necessary in 2026. President Christine Lagarde indicated that the central bank will raise Eurozone growth projections next week, as the economy shows resilience amid ongoing trade tensions. In France, political risks eased slightly after the National Assembly narrowly approved next year’s social-security bill, providing a temporary boost to Sébastien Lecornu’s minority government as attention now turns to the uncertain passage of the broader state budget.

Euro Rises Amid Dollar Slump

The dollar index dropped below 99.0 on Wednesday, moving closer to its lowest level since late October, after the Federal Reserve delivered the anticipated 25-basis-point rate cut but pointed to only one rate reduction in 2026. More notably, a tweak in the Fed’s statement, citing “the extent and timing of additional adjustments”, suggests officials are likely to pause further cuts in January as they wait for additional data to better assess the economic outlook. The latest projections show a meaningful upgrade to the growth outlook. Policymakers now expect the economy to expand 2.3% next year, up from the 1.8% forecast in September. Growth in 2027 is also seen slightly higher, at 2% versus 1.9% previously. Meanwhile, the Fed lowered its inflation forecasts for 2025 to 2.5% from 2.6% and for 2026 to 2.4% from 2.6%, though both remain above the central bank’s 2% target.

Dollar Index Slips as Fed Cuts Rates

The Canadian dollar held above 1.38 per US dollar, easing from two-month highs of 1.38 reached on December 5 as investors digested the Bank of Canada decision and guidance. The Bank of Canada’s December hold at 2.25% reiterated that policy is about right because growth and labour market surprises have narrowed slack. Third-quarter GDP surprised to the upside with annualized growth of 2.6% and the labour market added significant jobs as the unemployment rate fell to about 6.5%. Those developments reduce the near-term odds of easing and tilt the balance toward later tightening if underlying inflation proves persistent. On the other hand, oil, Canada’s largest export price, has eased from its early-December spike, removing a key terms-of-trade tailwind for the loonie. The Bank also flagged that recent GDP strength largely reflected volatile trade and that fourth-quarter growth may be weaker, undercutting confidence in a durable domestic upswing.

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