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Investing.com-- Most Asian currencies ticked lower on Monday as investors weighed conflicting signals on the Federal Reserve’s policy move next month, while the Indian rupee rebounded from record lows on possible central bank intervention.
The US Dollar Index was largely steady on Monday after more than 1% gains last week. US Dollar Index Futures were also muted as of 04:42 GMT.
The probability of a 25-basis-point rate cut by the Federal Reserve (Fed) in December jumped to around 69% from about 44% a week earlier, according to the CME FedWatch Tool.
The rise in expectations reflected comments from John Williams of the New York Fed, suggesting policy adjustment is possible in the near term. However, a number of Fed officials have cautioned that inflation remains too high and the labour market too tight for a cut at this stage, leaving the outcome uncertain.
"Given the minutes to the October FOMC meeting indicated many Fed officials were ’leaning’ against a December cut, the fact we might not have the key jobs and inflation numbers is not going to convince them to vote differently," ING analysts said in a note.
The Chinese yuan’s offshore USD/CNH pair ticked 0.1% higher, while the Singapore dollar’s USD/SGD ticked up 0.2%.
The South Korean won’s USD/KRW pair fell 0.5%, with the currency leading regional losses.
The Australian dollar’s AUD/USD pair was largely unchanged.
Yen under pressure from fiscal concerns
The Japanese yen remained under pressure after hitting multi-month lows last week, amid expectations that the Bank of Japan (BOJ) may maintain or even ease policy while the newly installed administration led by Sanae Takaichi pursues expansionary fiscal-monetary measures.
The yen’s USD/JPY pair edged 0.1% higher on Monday after jumping over 1% last week.
Yen’s weakness was tempered somewhat after officials in Tokyo escalated warnings that currency intervention remains an option if the decline becomes disorderly.
"The weakness in the Japanese Yen was also another key driver and focus of markets with spillovers to Asia FX, with domestic concerns around the path of Bank of Japan rate hikes, the size of fiscal policy stimulus, coupled with tensions between the Japan and China relationship," MUFG analysts said in a note.
Indian rupee rebounds on RBI intervention
Meanwhile, the Indian rupee’s USD/INR pair fell 0.5% after surging more than 1% to a record high of 89.72 rupees on Friday. Reports showed that possible intervention by the Reserve Bank of India (RBI) helped arrest the rupee’s slide.
"RBI was previously defending the 88.80 level, but heavy stop losses were likely triggered within a short span of time once the pair moved quickly past the 88.80 level with RBI absent on Friday," MUFG analysts wrote.