The dollar index strengthened slightly to 100.5 on Tuesday, hovering near its highest level since late July, as it continued to benefit from a more hawkish stance from the Federal Reserve, reinforcing expectations for further interest rate hikes this year. On Monday, Chicago Fed President Goolsbee said the central bank cannot overlook repeated and persistent supply shocks, while St. Louis Fed President Musalem said additional rate increases may be necessary to bring inflation back toward the Fed’s target. Last week, the Fed raised interest rates for the first time in three years and signaled further tightening later this year to curb inflation. Meanwhile, oil prices continued to fall, though they remained off their session lows, as traders continued to assess diplomatic efforts to end the conflict in the Middle East. Traders also remained alert to the possibility of currency intervention to support the yen.

Dollar Holds Near July Highs

Sterling weakened to $1.336, near its lowest level since late July, as investors assessed the latest developments in the Middle East alongside weaker-than-expected UK public finances. The US dollar remained supported by expectations of further interest-rate hikes from the Federal Reserve. Brent crude resumed its recent decline after reports that Iran had proposed reopening the Strait of Hormuz within seven days if Washington agrees to demands including lifting its military blockade of Iranian ports. Meanwhile, UK government data showed the budget deficit widened to £18.3 billion in August, above the £15.5 billion forecast, partly reflecting higher inflation-linked spending on pensions and benefits. Attention is now turning to next month’s Autumn Budget, with the government reportedly considering changes to its fiscal rules that would allow borrowing for infrastructure projects to be excluded.

Sterling Under Pressure as UK Deficit Widens

The euro weakened to $1.145, its lowest level since late July, as investors assessed developments in the Middle East while the USD remained supported by expectations of further Federal Reserve rate hikes. Brent crude resumed its decline after reports that Iran had offered to reopen the Strait of Hormuz within seven days if Washington lifts its military blockade of Iranian ports. Meanwhile, ECB’s Chief Economist Philip Lane warned that a new wave of higher energy prices could keep Eurozone inflation elevated for longer than policymakers initially anticipated. He said the shock should result in higher and more persistent inflation before a decline toward the ECB’s target from mid-2027. Following this month’s second rate hike since the Iran war sent energy costs soaring, ECB officials have begun laying the groundwork for further tightening. Eurozone inflation is expected to reach around 4% in coming months, with the ECB projecting 3% this year and 2.5% next year, well above its 2% target.

Euro Nears Two-Month Low

The euro weakened to $1.145, touching its lowest level since late July, as higher oil prices weighed on sentiment while the US dollar remained supported by expectations of further Federal Reserve rate hikes. Brent crude rose after touching its lowest level since September 10, with ongoing Middle East tensions keeping markets focused on energy flows and potential diplomatic efforts at this week’s UN meetings. Investors are also monitoring political uncertainty in Germany and mounting concerns over France’s public finances. Germany’s governing CDU suffered its worst-ever state election result in Mecklenburg-Western Pomerania, failing to win a single seat and prompting some party members to call for Chancellor Friedrich Merz to step down after 16 months in office. Meanwhile, France’s fiscal position remains under scrutiny as the government struggles to reduce its budget deficit, which stands at more than 5% of GDP, ahead of a divisive election next year.

Euro Slides as Oil Rises and Political Risks Persist

Sterling weakened to $1.336, near its lowest level since late July, as higher oil prices and weaker-than-expected UK public finances weighed on sentiment. At the same time, the US dollar remained supported by expectations of further interest-rate hikes from the Federal Reserve. Brent crude climbed towards $102 a barrel, on track to end a four-day losing streak, amid uncertainty over oil flows and potential Middle East diplomacy. President Donald Trump is due to address the UN General Assembly later today and could meet his Iranian counterpart on the sidelines. UK government data showed the budget deficit widened to £18.3 billion in August, above the £15.5 billion forecast, partly reflecting higher inflation-linked spending on pensions and benefits. Attention is now turning to next month’s Autumn Budget, with the government reportedly considering excluding infrastructure borrowing from its fiscal rules.

Sterling Slips as Oil Rises and UK Deficit Widens

The Indonesian rupiah edged higher to near IDR 17,850 per U.S. dollar on Tuesday, snapping an eight-session losing streak after Bank Indonesia pledged intervention to ensure orderly trading. Officials said tools would include offshore and domestic NDFs, spot FX transactions, and secondary-market bond purchases. The central bank began its two-day policy meeting today, with local media widely expecting interest rates to stay unchanged as policymakers lean on FX operations and central bank securities to steady the currency. Borrowing costs have been held for two months after 100bps of hikes since May. On the fiscal side, Finance Minister Suahasil Nazara urged constructive debate over the statutory 3% deficit cap, following lawmakers’ push to revise the 2003 State Finance Law to allow wider shortfalls for social programs. Gains were tempered, however,  by a firmer U.S. dollar index near a two-month high, as hawkish Fed remarks reinforced expectations of further tightening.

Rupiah Inches Up as BI Signals FX Support

The South Korean won strengthened to around 1,360 per dollar, rebounding from four-week lows as oil prices fell sharply. WTI crude declined 4.5% below $100 a barrel, while Brent fell more than 3% amid hopes for progress in US-Iran diplomacy and a recovery in Saudi oil shipments. The US 10-year Treasury yield also fell back below 5% after reaching recent highs last week, easing demand for the dollar. Additionally, South Korea’s strong export performance continued to underpin the won, with exports surging 78% year-on-year in the first 20 days of September, driven by a 259% jump in semiconductor shipments and boosting dollar inflows. Meanwhile, the dollar remained relatively firm as markets monitored the possibility of another Federal Reserve rate increase later this year. Separately, the Bank of Korea said it would assess inflation, growth and financial stability when determining the timing and pace of further rate hikes.

South Korean Won Rebounds

The Japanese yen weakened to around 157.5 per dollar on Tuesday, falling for a third straight session and keeping traders alert for possible intervention amid an extended holiday in Japan. Tokyo has previously taken advantage of thin holiday liquidity to intervene in currency markets, while concerns intensified following reports that the Bank of Japan conducted a rate check with market participants late Friday. The yen also remained under pressure from a stronger dollar as hawkish comments from Federal Reserve officials reinforced expectations for further US interest rate hikes. Last week, the Japanese currency fell sharply after the BOJ raised rates in a widely anticipated move, with two policymakers dissenting from the decision. Governor Kazuo Ueda said the BOJ remains committed to raising rates and adjusting the degree of monetary accommodation as economic conditions evolve, while noting that accommodative financial conditions are expected to remain in place to support growth.

Yen Remains on Intervention Watch

The Australian dollar hovered around $0.71, trading in a sideways range near multi-week lows as a stronger US dollar offset rising expectations of another RBA rate hike. In a podcast interview, RBA Assistant Governor Sarah Hunter confirmed the need for further rate hikes this year. She reiterated the central bank’s warnings that inflation has remained too high for too long, risking becoming embedded in price-setting behavior. The comments lifted market pricing for a 25-bp rate hike at the RBA’s September 29 meeting to 95%. All four major banks now also expect a move at next week’s meeting, with Commonwealth Bank of Australia and ANZ joining Westpac and NAB in calling for a hike, with ANZ expecting another increase in November. Attention now turns to Governor Michele Bullock’s remarks and a speech by RBA board member Iain Ross later today. Meanwhile, the greenback remained firm as hawkish remarks from Federal Reserve officials reinforced expectations for further interest rate hikes.

Australian Dollar Hovers Near Multi-Week Lows

The New Zealand dollar fell to around $0.570 on Tuesday, its lowest level since July 8, as hawkish Federal Reserve commentary kept the US dollar firm. Chicago Fed President Austan Goolsbee and St. Louis Fed President Alberto Musalem indicated that further rate increases may be needed, citing persistent supply shocks and inflation remaining above the Fed’s target. The kiwi has also remained under pressure since the Reserve Bank of New Zealand raised its cash rate earlier this month while signalling that further tightening would be gradual. However, markets continue to price in another rate hike in October, with the recent surge in oil prices adding to upside risks to inflation. Meanwhile, traders are looking to a US-China summit later this week for signs of progress in relations between the world’s two largest economies. A positive outcome could lift global risk appetite and lend support to the kiwi, given New Zealand’s strong trade ties with China.

New Zealand Dollar Moves Lower

The dollar index held around 100.3 on Tuesday, staying near its highest level since late July as hawkish remarks from Federal Reserve officials reinforced expectations for further interest rate hikes. On Monday, Chicago Fed President Austan Goolsbee said the central bank cannot overlook repeated and persistent supply shocks, while St. Louis Fed President Alberto Musalem said additional rate increases may be necessary to achieve the Fed’s inflation target. Investors now await speeches from Fed officials John Williams and Tom Barkin later today. Last week, the Fed raised interest rates for the first time in three years and signaled further tightening later this year to curb inflation. Meanwhile, oil prices fell for four straight sessions amid increased diplomatic efforts to end the Middle East conflict and signs of continued energy flows from the region, easing inflation concerns. Traders also remained alert for possible currency intervention to support the yen.

Dollar Holds Firm on Hawkish Fed Signals

The South African rand traded around 16.3 per USD, holding close to the lowest since early August, amid a firmer dollar and falling prices of key precious metals. Domestically, investors awaited August consumer inflation data and the SARB’s policy decision, both due on September 23. Headline Inflation fell to 4.3% in July from 5% in June but is expected to pick up again in August after diesel-price adjustments. South Africa could be heading for a 25 bps rate hike this week, as higher oil prices and the Fed’s latest move strengthen the case for tighter monetary policy amid renewed inflation risks. The key concern is that inflation could remain above target for longer. That said, the SARB's decision remains uncertain, particularly after the central bank surprised markets and economists in July by keeping its repo rate unchanged at 7%. Policymakers will again face a delicate balancing act between containing renewed inflationary pressures and supporting weak domestic economic activity.

South African Rand Stands at Over 1-Month Low

The dollar index edged up to 100.3 on Monday, reaching its highest level in almost three months and extending last week’s gain of nearly 1.1%, as the greenback continued to benefit from a more hawkish stance from the Federal Reserve. The central bank raised the federal funds rate by 25bps last week and is expected to deliver another hike by year-end. Chicago Fed President Goolsbee said he remains open to the possibility that inflation will resume its decline towards the 2% target, but warned that interest rates may need to rise if that fails to materialise. Meanwhile, Minneapolis Fed President Kashkari said yesterday that inflation remains too high across all sectors of the economy, rather than being driven solely by oil prices. Oil prices however, fell for a fourth consecutive session amid hopes that diplomatic efforts could lead to a resolution to the conflict with Iran. The greenback was broadly higher against the yen, euro and pound.

Dollar Index Above 100

Sterling remained below $1.34 as traders slightly pared back expectations for Bank of England rate hikes amid a decline in oil prices. Brent eased toward $100 a barrel after US President Trump left the door open to diplomacy with Iran, helping to reduce fears of an imminent supply shock, while stronger regional crude flows have further eased pressure on physical markets. UK policymakers made clear last week that the outlook for inflation, and therefore interest rates, will depend heavily on the path of oil and gas prices in the coming months. Markets currently price around an 80% chance of a rate hike at the November meeting, with roughly a 56% probability of a second increase by year-end. Meanwhile, investors are turning their attention to next month’s Autumn Budget, with the government reportedly considering plans to extend a new property tax to homes worth more than £1.5 million. Elsewhere, the USD remained supported by expectations of further interest-rate hikes from the Fed.

Sterling Under Pressure as BoE Rate-Hike Bets Ease

The euro remained under pressure around $1.148, close to its weakest level since late July, as political uncertainty in Germany and concerns over France’s public finances weighed on sentiment. Germany’s governing CDU suffered its worst-ever state election result in Mecklenburg-Western Pomerania, failing to win a single seat and prompting some party members to call for Chancellor Friedrich Merz to step down after just 16 months in office. In Berlin, Merz’s CDU, which has governed the German capital since 2023, also trailed the Left party, which won 25.7% of the vote. The political establishment had already been shaken by the CDU’s defeat to the anti-immigration AfD in Saxony-Anhalt two weeks ago. Meanwhile, France’s public finances are coming under increasing scrutiny, with Scope Ratings downgrading the country and Morningstar DBRS shifting its outlook to negative, adding to a growing series of warnings over France’s fiscal position ahead of next year’s presidential election.

Euro Under Pressure as German Politics and French Finances Weigh

The Indian rupee hovered around 95.75 per dollar, extending gains from the previous session as softer oil prices, expected portfolio inflows and continued RBI intervention helped limit downside. Brent crude fell about 2% to $101.7 a barrel as hopes for a diplomatic solution to the Iran conflict and improving Saudi energy shipments eased supply concerns. The fully subscribed $2.3 billion NSE IPO could also attract foreign institutional inflows, while improved capital flows and RBI measures to encourage overseas FX deposits and borrowings have lifted reserves to about $781 billion. However, strong importer dollar demand and elevated oil prices remain headwinds. A firm dollar could add pressure, with Goldman Sachs now expecting the Federal Reserve to deliver another 25-basis-point hike in October.

Rupee Holds Gains as Oil Prices Ease

The Indonesian rupiah was little changed on Monday, hovering near IDR 17,810 per U.S. dollar after a seven-session losing streak, as traders positioned for Bank Indonesia’s policy decision this week. The central bank will begin its two-day meeting Tuesday, after leaving key rates unchanged at 5.75% for a second straight month in August following 100bps of hikes since May. Governor Destry Damayanti recently underscored currency stability as her priority alongside monetary, macroprudential and payment-system measures. Meanwhile, softer oil prices, aided by diplomatic efforts in the Middle East, eased imported inflation concerns, though domestic pressures persisted after August’s annual inflation quickened to 3.19%. Fiscal risks also lingered as lawmakers reportedly debated revising the 3% deficit cap to allow more welfare and development spending. Globally, the dollar index held near 100.2 as investors looked to remarks from Fed officials this week for signals on the policy outlook.

Rupiah Holds Near IDR 17,810 as BI Meeting Looms

The dollar index steadied around 100.2 on Monday after surging last week, with investors awaiting several appearances by Federal Reserve officials this week for further clues on the outlook for monetary policy. On Sunday, Minneapolis Fed President Neel Kashkari said inflation remains too high and that price pressures have spread beyond the initial oil-price shock linked to the Iran war. Chicago Fed President Austan Goolsbee is scheduled to speak later Monday, followed by New York Fed President John Williams on Tuesday. Last week, the dollar index climbed more than 1% after the Fed raised interest rates and signaled at least one additional hike this year, while Chair Warsh reiterated the central bank’s commitment to bringing inflation under control. The Bank of Japan also raised rates as expected, although two policymakers dissented, suggesting the central bank may move more cautiously with further increases than previously anticipated and weighing on the yen.

Dollar Steadies as Markets Await Fed Remarks

The New Zealand dollar traded around $0.571 on Monday, near a ten-week low, as traders looked to a US-China summit later this week for indications on the state of relations between the world’s two largest economies. Among the key areas under discussion are an extension of the current tariff truce, which is set to expire on November 10, further tariff reductions, agricultural purchases, and AI. Any positive developments could improve global risk sentiment and support the kiwi, given that China is New Zealand’s largest trading partner. The kiwi has been under pressure since the Reserve Bank of New Zealand raised its cash rate earlier this month but signalled a more gradual pace of future tightening. Still, markets largely expect the central bank to hike rates again in October, as the recent spike in oil prices has increased upside inflation risks. Meanwhile, a firmer US dollar, supported by expectations of more Fed rate hikes, has added to downward pressure on the kiwi.

New Zealand Dollar Trades Near 10-Week Low

The offshore yuan held its gains around 6.69 per dollar on Monday, remaining at its strongest level since July 2022, as the People’s Bank of China kept its benchmark lending rates unchanged for a 16th consecutive month at record lows. The one-year loan prime rate (LPR) was held at 3.0%, while the five-year LPR remained at 3.5%. The decision comes as policymakers face limited room for further monetary easing as the yuan continues to strengthen and after other central banks shifted to rate hikes. However, current conditions continue to support the possibility of a rate cut before year-end, as economic growth slows, inflation remains subdued, and credit activity stays weak. Meanwhile, investor focus remained on high-level US-China engagement after officials from both countries met in New York on Sunday to prepare for a closely watched summit between Presidents Donald Trump and Xi Jinping on September 24.

Offshore Yuan Holds at Over 4-Year High

The Japanese yen consolidated near 157 per dollar on Monday after falling more than 2% last week, with traders remaining on alert for possible intervention as Japan begins a three-day holiday. Tokyo has previously used periods of thin holiday liquidity to intervene in currency markets, while concerns were heightened by reports that the Bank of Japan conducted a rate check with market participants late Friday. The yen weakened sharply last week after the BOJ raised interest rates in a widely anticipated move, with two policymakers dissenting from the decision. Governor Kazuo Ueda said the BOJ remains committed to raising rates and adjusting the degree of monetary accommodation in response to changing economic conditions, while noting that accommodative conditions are expected to remain in place to support growth. The yen also came under pressure from expectations that Japan’s rate-hiking cycle could move more slowly than the Federal Reserve’s.

Yen Consolidates Amid Holiday-Thinned Trading

The Mexican peso weakened to near 17.2 per US dollar after touching a more than two-year high of 16.98 on September 11th, following the US Fed’s decision to raise interest rates. The Fed increased its federal funds target rate by 25 bps to 3.75%-4.00%, as widely expected, while a majority of FOMC members projected another hike this year. The narrowing interest-rate differential is supporting the dollar. Mexico’s central bank left its benchmark rate unchanged at 6.50% at its August meeting, noting that inflation is expected to continue declining gradually and converge to the 3% target in the fourth quarter of 2027. Banxico also highlighted that Mexico’s economy rebounded in the second quarter after contracting in the previous quarter, although downside risks to growth persist. The board reiterated that it expects to keep the benchmark rate at its current level amid uncertainty over geopolitical conflicts, global trade policies, and their potential impact on inflation.

Mexican Peso Weakens After Fed Rate Hike

The South Korean Won touched 1389.00 against the USD, the lowest since August 2026. Over the past 4 weeks, US Dollar South Korean Won lost 0.01%, and in the last 12 months, it decreased 0.63%.

South Korean Won Hits 4-week Low

The dollar index rose to 100.4 on Friday, its highest level in one-and-a-half months, continuing to benefit from the latest FOMC decision and a weaker yen. The Federal Reserve raised the target range for the federal funds rate by 25bps to 3.75%-4%, as expected. The Fed also signalled at least one more rate hike this year, while Chair Warsh reaffirmed the central bank’s commitment to taming inflation, helping to restore market confidence in its policy stance and credibility. On the other hand, the Bank of Japan raised borrowing costs by 25bps, as anticipated, but two policymakers voted against the hike, suggesting that the central bank may not proceed with further increases as quickly as initially expected, and sending the yen lower. The dollar is up nearly 1.3% on the week.

Dollar Gains More than 1% on the Week

The Swiss franc weakened past 0.82 per USD, hitting its lowest level since May of 2025, on a widening interest rate differential with the US and selling pressure from new carry trades. The Federal Reserve's first rate hike in three years boosted greenback demand, while the Bank of Japan's policy tightening and a historic Washington–Tokyo intervention to support the yen reduced the currency's appeal as a carry-trade funding source. Traders pivoted to alternatives offering exchange-rate stability and low borrowing costs, such as the Swiss franc, selling franc loans for higher-yielding assets and pressuring the currency lower. Contrasting with other central banks, the Swiss National Bank is expected to hold its policy rate at 0% through year-end, the lowest among major economies, favoring interventions to cap excessive franc strength. Offsetting this downward pressure, persistent Middle East tensions threatening energy supplies lift safe-haven demand.

Swiss Franc Weakens to Over One-Year Low

The euro traded just below $1.15, near its weakest level since late July, and was down nearly 1% against the US dollar as traders scaled back expectations for further ECB rate hikes. The pullback came despite a more restrictive tone from the Federal Reserve, which raised rates this week and signaled scope for further tightening, following a similar move by the ECB last week. Some analysts argued that markets had gone too far in pricing additional ECB hikes, noting that higher energy prices could weigh on growth and ultimately ease inflationary pressures. Money markets now price the ECB deposit rate at just below 2.9% by December, implying roughly a 50% chance of a second hike this year. By November 2027, rates are priced at 3.39%. Elsewhere, the Bank of England held rates steady on Thursday but warned that a prolonged Middle East conflict could prompt tighter policy, while the Bank of Japan raised rates to their highest level in 31 years and signaled further tightening ahead.

Euro Nears July Low as Markets Scale Back ECB Rate-Hike Bets

The British pound was little changed at $1.337 on Friday, remaining near its weakest level since late July, as investors weighed stronger-than-expected retail sales and this week’s central bank decisions. UK retail sales rose 0.5% in August, defying expectations for a 0.2% decline and rebounding from July’s fall. Department stores led the recovery as retailers resolved stock availability issues, pointing to resilient consumer spending despite elevated energy prices and the prospect of tighter monetary policy. The Bank of England held rates steady on Thursday and said it would stop selling very long-dated gilts under its quantitative tightening programme, while warning that a prolonged Middle East conflict could prompt tighter policy. The Federal Reserve and Bank of Japan also raised rates this week and signaled scope for further tightening this year.

Pound Holds Near July Low

The Japanese yen weakened past 157 per dollar on Friday, hitting two-week lows after the Bank of Japan raised interest rates in a widely telegraphed move, with two officials dissenting to the decision.  The currency later pared its decline after Governor Kazuo Ueda said at the post-meeting press conference that the BOJ remains committed to raising rates and adjusting the extent of monetary accommodation based on changes in economic activity, prices and financial conditions. The central bank lifted its policy rate by 25 basis points to 1.25%, the highest since April 1995, as policymakers contend with persistent inflation and disruptions stemming from the Middle East. The hike was opposed by board members Toichiro Asada and Ayano Sato, highlighting some resistance to a quicker tightening cycle. Meanwhile, Japan’s core inflation eased to 1.7% in August from 1.8% in July, marking its first decline in four months.

Yen Remains Volatile as Ueda Reaffirms Tightening Path

The Nikkei 225 Index advanced 1.38% to finish at 65,019 on Friday, extending its winning streak to three sessions after the Bank of Japan raised its policy rate by 25 basis points to 1.25% in a widely telegraphed move. The decision was not unanimous, however, as board members Toichiro Asada and Ayano Sato opposed the increase, signaling some resistance to a more rapid pace of policy tightening. Despite the dissent, Governor Kazuo Ueda said at the post-meeting press conference that the BOJ remains prepared to raise rates further and adjust the level of monetary easing as economic conditions evolve. Meanwhile, official data showed Japan’s core inflation slowing to 1.7% in August from 1.8% in July, its first decline in four months. Technology and AI-related shares led the market higher after similar gains on Wall Street overnight, with Kioxia (9.4%), SoftBank Group (1.1%), Advantest (6%), Lasertec (8.7%), and Taiyo Yuden (4.2%) among the notable advancers.

Japanese Shares Rise After BOJ Decision

The Indonesian rupiah edged higher to below IDR 17,750 per U.S. dollar on Friday, snapping a six-session losing streak as oil prices retreated further, easing concerns over imported inflation. Meanwhile, policymakers continued their efforts to contain food-price volatility after headline inflation accelerated to 3.19% in August. Globally, the dollar index steadied after reaching a seven-week high, with traders assessing the Federal Reserve’s policy outlook following its latest rate decision. For the week, however, the rupiah remains on track for a decline of around 0.7%, which would halt a six-week winning streak. Sentiment was pressured by an uncertain policy outlook, as Bank Indonesia seeks to maintain an adequate interest-rate differential with the U.S. while supporting rupiah stability and economic growth. The central bank will hold its policy meeting next week after leaving borrowing costs unchanged for a second straight month in August.

Rupiah Rises But Set for First Weekly Decline in 7 Weeks

The Chinese Yuan touched 6.69 against the USD, the highest since July 2022. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.55%, and in the last 12 months, it decreased 5.92%.

Chinese Yuan Hits 4-year High

The Japanese yen weakened to around 157 per dollar on Friday, touching two-week lows after the Bank of Japan delivered a widely anticipated interest-rate hike. The central bank lifted its policy rate by 25 basis points to 1.25%, its highest level since April 1995, as policymakers contend with persistent inflationary pressures and ongoing disruptions from the Middle East. The decision was not unanimous, however, with board members Toichiro Asada and Ayano Sato voting against the increase. Attention now turns to the BOJ’s guidance on the scope and timing of further policy tightening. Analysts have indicated that Japan’s tightening cycle may struggle to match the pace of Federal Reserve rate increases, following the Fed’s hawkish hike earlier this week. Meanwhile, Japan’s core inflation slowed to 1.7% in August from 1.8% in July, marking its first decline in four months.

Yen Weakens as BOJ Hikes Rates

The Indian rupee strengthened to around 95.7 per dollar, rebounding from seven-week lows as easing crude oil prices, expectations of foreign portfolio inflows linked to the National Stock Exchange’s $2.3 billion IPO and likely RBI intervention supported the currency. Brent crude fell for a third straight session to around $104.1 a barrel as hopes of alternative routes for Middle Eastern oil to reach markets outweighed supply concerns, while a modest retreat in US bond yields also provided relief. Traders expect sizeable foreign institutional investor demand for the NSE IPO, which closes for subscription on Monday. The rupee held near 96 per dollar on Thursday despite the Federal Reserve’s rate hike, recovering after likely RBI intervention and portfolio inflows linked to global equity index rebalancing. However, strong importer dollar demand and elevated oil prices remain headwinds, while the dollar stays above 100 following the Fed’s hawkish stance.

Rupee Rebounds on Lower Oil, IPO Inflows

The offshore yuan strengthened to around 6.69 per dollar on Friday, extending gains from the previous session and reaching its strongest level since July 2022, as a firmer daily fixing from the People’s Bank of China continued to support the currency. The central bank set the daily midpoint at 6.7521 per dollar, stronger than Thursday’s 6.7580, marking an upward bias in the fixing for an eighth consecutive session and the longest such run since 2023. The move indicated that the central bank may be increasingly comfortable with a stronger yuan ahead of President Donald Trump’s meeting with Chinese leader Xi Jinping in the US on September 24. A stronger currency could help alleviate some trade tensions between the two economies, as Western officials have argued that an undervalued yuan gives Chinese exporters a competitive edge. Meanwhile, US Treasury Secretary Scott Bessent is also set to meet Chinese Vice Premier He Lifeng this weekend.

Offshore Yuan Strongest Since 2022

The New Zealand dollar slipped to around $0.571 on Friday, moving back near a ten-week low after rising 0.3% in the previous session, as a firmer US dollar continued to weigh on the currency. The greenback clung to a seven-week high after the Federal Reserve hiked rates and signaled further tightening ahead. This outweighed support from better-than-expected domestic data. New Zealand’s GDP growth in the second quarter beat estimates, suggesting some resilience in economic activity despite the severe energy shock from US-Iran war. In addition, the country’s trade deficit narrowed more than anticipated in August, as export growth outpaced the increase in imports. Meanwhile, markets are pricing in a 65% chance that the Reserve Bank of New Zealand will raise its cash rate again to 3.0% at its October meeting. The kiwi was down around 1.6% so far this week, marking its fourth consecutive weekly decline.

New Zealand Dollar Falls Back

The dollar index held around 100.2 on Friday, remaining close to seven-week highs as traders weighed the Federal Reserve’s policy outlook following its latest rate decision and amid softer oil prices. The index is heading for a weekly gain of more than 1% after the FOMC unanimously lifted the fed funds rate by 25 basis points to 3.75%-4%, marking its first increase in three years. Fed officials also indicated that additional tightening could come later this year as they seek to contain rising price pressures, with Chair Kevin Warsh noting that inflation remains elevated. The Bank of Japan is also expected to raise rates, while the Bank of England left borrowing costs unchanged on Thursday but cautioned that prolonged conflict in the Middle East could eventually require a rate hike. Meanwhile, oil prices extended their decline for a third session as Saudi Arabia worked to restore flows through its East-West pipeline, easing inflation worries.

Dollar Steadies as Traders Assess Fed Outlook

The Japanese yen weakened past 156 per dollar on Friday, hovering near two-week lows as investors awaited the latest Bank of Japan policy decision, with markets widely expecting an interest-rate hike. Investors will also seek guidance on the potential for further tightening as policymakers contend with rising inflation and wages, alongside pressure from US Treasury Secretary Scott Bessent for a more aggressive pace of rate increases. Meanwhile, Japan’s core inflation eased to 1.7% in August from 1.8% in July, marking its first slowdown in four months. However, expectations that price pressures could strengthen in the coming months continued to support a hawkish BOJ outlook, with disruptions stemming from the Middle East adding to inflation risks. Earlier this month, the yen climbed to seven-month highs on expectations of more aggressive BOJ tightening, recent joint interventions by Tokyo and Washington, and prospects of greater capital repatriation by Japanese investors.

Yen Slips Ahead of BOJ Decision

The Australian dollar rose above $0.71, attempting to recover from a recent four-week low as hawkish comments from the Reserve Bank’s top official reinforced expectations for further policy tightening. Governor Michele Bullock said upside inflation risks were materializing and warned that higher costs could make inflation more persistent, pointing to the Middle East conflict, rising energy prices and stronger domestic cost pressures. Prior to the testimony, swaps markets priced at least two more rate hikes by the February meeting, with a roughly 87% chance the first occurs on September 29. That marks a notable shift from the start of September, when traders were pricing just one further hike, likely by year-end. The Aussie also benefited from a softer US dollar, alongside lower Treasury yields and easing oil prices, while a rebound in global equities provided additional support for the risk-sensitive currency.

Australian Dollar Attempts Rebound

The Brazilian real traded near R$5.15 per US dollar in September, little changed after the BCB cut the Selic rate by 25 basis points to 13.75%. The BCB left its next steps open, saying that the current environment of uncertainty calls for composure and caution in the conduct of monetary policy. It was the final monetary policy meeting before the presidential election in October. The decision was announced after the US Federal Reserve raised its federal funds target rate by 25 basis points to a range of 3.75% to 4.00%. The narrowing interest-rate differential is a factor supporting the dollar, although it had already been priced into markets, with both rate decisions coming in line with expectations. Meanwhile, gains by Flávio Bolsonaro in recent presidential election polls have supported the real, as markets view Bolsonaro as fiscally restrictive, while elevated domestic yields and weak business activity continue to weigh on the economic outlook.

Brazilian Real Steady After Selic Cut

The South African rand strengthened toward 16.2 per USD, supported by a softer dollar and firmer precious metals prices on the back of easing oil prices. Meanwhile, traders continued to monitor central bank actions. The Federal Reserve delivered an expected 25 bps rate hike and signalled that further tightening may follow amid persistent inflatonary pressures from the Middle East. Expectations for a SARB rate hike increased after the Fed's move, as a narrower yield differential could weigh on the rand and fuel inflationary pressures. The South African Reserve Bank will face a delicate balancing act when it decides on policy on September 23. Inflation has been rising and, aside from a brief dip in July following fuel-price cuts, remains on an upward trajectory. Meanwhile, the economy slipped back into contraction in the second quarter. At the same time, inflation expectations fell in Q3, signaling that price pressures are expected to ease over time.

South African Rand Firms

The British pound held just below $1.34, near its weakest level since late July, after the Bank of England kept rates at 3.75% in a 6-3 vote, and warned that rates could need to rise if inflationary pressures intensify due to the conflict in the Middle East. In prepared remarks, Governor Andrew Bailey said the global energy shock has so far had a limited impact on UK prices and wages, but warned that prolonged volatility could put greater pressure on inflation and increase the need for a rate hike. The MPC also unanimously voted to reduce its stock of UK government bond purchases to zero through a multi-year programme, with an average annual pace of £46 billion through 2034, slower than previously and below the £50 billion expected by markets. The BoE now expects inflation to reach twice its 2% target early next year, while raising its third-quarter GDP forecast to 0.4%. Meanwhile, the Fed raised rates by 25 basis points yesterday and signaled another hike later this year.

Sterling Holds Near Two-Month Low as BoE Keeps Rates Steady

The euro traded just below $1.15, remaining close to its weakest level since late July, as the dollar strengthened after the Federal Reserve raised interest rates yesterday and signaled another hike later this year. US policymakers voted unanimously to lift the benchmark federal funds rate to a range of 3.75% to 4% on Wednesday, the first increase since July 2023, as they seek to contain rising inflation. Updated FOMC projections also showed that a strong majority of officials see another hike as possible later this year. Meanwhile, investors have increased bets on further European Central Bank rate hikes amid renewed inflation concerns. Markets are now pricing the ECB deposit rate at around 2.9% by December, up from the current 2.5%. The ECB raised rates last week for the second time this year to contain an energy-driven rise in inflation, while warning that price pressures could prove persistent, reinforcing expectations for further tightening.

Euro Holds Near Two-Month Low as Fed, ECB Rate Bets Rise

The British pound traded around $1.34, its weakest level since late July, ahead of the Bank of England’s highly anticipated policy announcement, while investors were also digesting the Federal Reserve’s rate hike yesterday. No change in interest rates is expected from the BoE today, but markets will be watching closely for any signals about the future path of policy, with a November hike still priced in, albeit with less conviction as oil prices retreat for a second consecutive session. The outlook for the Middle East remains highly uncertain, however, keeping oil prices elevated and adding to the challenge facing central banks as they try to contain inflation without putting excessive pressure on economic activity. In the US, the Federal Reserve raised interest rates by 25 basis points, the first increase since July 2023, and signaled another hike later this year, as policymakers continue to grapple with persistent inflation pressures.

Sterling Under Pressure Ahead of BoE Rate Decision

The South Korean won weakened to around 1,380 per dollar, hitting a three-week low as the Fed’s rate hike and hawkish guidance lifted the dollar. The Fed raised its policy rate by 25bp to 3.75%-4.00%, its first increase since 2023, and indicated another hike could come later this year, leaving the US-Korea rate gap as wide as 1 percentage point. The wider US-Korea rate differential kept attention on the relative yield advantage of dollar assets, while the dollar index hovered near a seven-week high following the FOMC decision. Additionally, foreign investors remained net sellers of Korean assets, extending a six-straight-session selling streak and adding to demand for dollars. Meanwhile, oil prices retreated from recent highs as Saudi Arabia offered additional crude cargoes and the damaged East-West pipeline was expected to resume operations within days, offering some relief to Korea’s energy import bill, although Brent remained above $100 a barrel.

South Korean Won Hits Three-Week Low

The Indonesian rupiah slipped toward IDR 17,750 per U.S. dollar Thursday, extending its losing streak to six sessions as the dollar index climbed to a seven-week high after the U.S. Fed raised rates for the first time in three years and signaled the possibility of further tightening this year to curb sticky inflation. Locally, focus turned to Bank Indonesia’s policy meeting next week, with policymakers having kept key rates unchanged at 5.75% for a second straight month in August, following cumulative tightening of 100bp since May. Inflation risks from higher oil prices and potential El Niño effects are complicating the policy outlook, as the central bank faces the challenge of preserving an adequate interest-rate differential while supporting rupiah stability. Meantime, fiscal pressures may persist as elevated global yields and cautious foreign investor sentiment weigh on Indonesian assets. So far this week, the rupiah has fallen around 0.8%, reversing gains in the prior six weeks.

Rupiah Falls for Sixth Session After Fed Rate Hike

The offshore yuan edged higher to around 6.70 per dollar on Thursday, after holding steady in the previous session, as China broadens currency clearing in a bid to advance the yuan’s internationalization. The Shanghai Clearing House started central counterparty (CCP) services for spot trades in the Singapore dollar, New Zealand dollar and Thai baht on Sept. 14, with twelve banks clearing 996 million yuan ($148 million) in the first session. The move could set the stage for more currencies to be cleared directly against the yuan as Beijing seeks to broaden its global use, alongside efforts by Chinese banks this year to expand clients’ access to direct yuan trading amid growing cross-border trade and investment. Meanwhile, US Treasury Secretary Scott Bessent is set to meet Chinese Vice Premier He Lifeng this weekend for final preparatory talks ahead of the Sept. 24 summit between Presidents Donald Trump and Xi Jinping in the US.

Offshore Yuan Edges Higher

The Indian rupee fell to around 96.1 per dollar, extending losses to multi-week lows as elevated crude oil prices, a stronger dollar and expectations of further US monetary tightening weighed on the currency. Brent crude hovered near $108 a barrel, keeping demand for dollars from oil importers elevated, while the US 10-year Treasury yield approached 5%. The pressure intensified after the Federal Reserve raised interest rates by 25 basis points on Wednesday, its first hike since 2023, and signalled another increase could follow this year. The move pushed the Dollar Index above 100 to its highest level in more than a month, while futures indicated roughly a 50% chance of another Fed hike next month. Foreign portfolio outflows from Indian stocks and bonds added to the pressure, although a $703 million allocation of NSE shares to anchor investors and continued RBI dollar sales could provide some support.

Rupee Breaches 96 as Hawkish Fed, Oil Weigh

The Japanese yen traded around 156.1 per dollar on Thursday after sliding for three straight sessions, pressured mainly by the dollar’s strength following the latest Federal Reserve policy decision. The US central bank raised interest rates for the first time in three years and signaled additional tightening this year to contain inflation. The Bank of Japan is also expected to raise borrowing costs on Friday, with another increase anticipated by the end of January. On the geopolitical front, oil prices eased amid hopes that Saudi Arabia can restore energy flows through its East-West pipeline. The yen had climbed to seven-month highs earlier this month on expectations of more aggressive policy tightening by the BOJ, recent joint interventions by Tokyo and Washington, and prospects for increased capital repatriation by Japanese investors.

Yen Holds Decline on Hawkish Fed Outlook

The dollar index held around 100.3 on Thursday following a sharp gain in the previous session, hovering at seven-week highs after the Federal Reserve raised interest rates for the first time in three years and signaled further tightening this year to contain inflation. The FOMC unanimously increased the fed funds rate by 25 basis points to 3.75%-4%, as expected, in a unanimous decision. Fed Chair Kevin Warsh also said inflation remains too high, while data released last week showed core US inflation rose more than anticipated in August. Meanwhile, President Donald called for rates to be quickly lowered to 1% or below in a social media post, though he stopped short of criticizing Warsh. Elsewhere, the Bank of England is expected to keep rates unchanged today, while the Bank of Japan is scheduled to raise rates on Friday. On the geopolitical front, oil prices eased amid hopes that Saudi Arabia can restore energy flows through its East-West pipeline.

Dollar Towers on Hawkish Fed View

The New Zealand dollar traded around $0.571, an over two-month low, amid a hawkish US Federal Reserve, while investors assessed GDP data at home. The Fed raised interest rates for the first time in three years, bringing the target range to 3.75%-4.00%, and signaled that another hike was likely before year-end, boosting the US dollar. Limiting further losses in the kiwi, however, data showed New Zealand’s economy expanded 0.2% in the three months to June, slightly exceeding the 0.1% market forecast and the Reserve Bank's expectation for no growth. Annual GDP increased 2.6%, also beating the expected 2.2%. The figures pointed to some resilience in economic activity despite the severe energy shock stemming from the Middle East conflict. Earlier this month, the RBNZ raised rates for a second consecutive time but indicated a less aggressive tightening path. However, markets expect the cash rate to reach 3.0% by December, as the recent oil price spike has raised upside inflation risks.

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