Asia FX weakens slightly, rupee recovers from record low as RBI holds rates

Investing.com-- Most Asian currencies weakened slightly on Wednesday as uncertainty over U.S. trade tariffs and interest rates persisted, while the Indian rupee recovered marginally from record lows after the Reserve  Bank of India kept interest rates unchanged.

The dollar steadied after logging sharp losses in recent sessions, amid heightened speculation that the Federal Reserve will cut interest rates in September. Dismal nonfarm payrolls data released last week largely furthered this notion.

The Japanese yen’s USDJPY pair was flat following weaker-than-expected average cash earnings data for June, which pointed to sluggish wage growth, which could in turn herald some cooling in inflation. 

The Chinese yuan’s USDCNY pair rose 0.1%, with focus on more U.S. tariffs against the country over Beijing’s continued buying of Russian oil. 

The South Korean won’s USDKRW pair rose 0.2%, while the Singapore dollar’s USDSGD pair was flat. 

The Australian dollar’s AUDUSD pair rose 0.3%, recovering further from a recent fall to one-month lows.

Indian rupee near record low on Trump tariff threat; RBI awaited 

The Indian rupee’s USDINR pair fell 0.1% on Wednesday, after briefly surging to a record high over 88 rupees earlier this week.

The currency saw some relief after the RBI left interest rates unchanged at 5.50%, ducking some market expectations that it would cut rates further. 

Expectations for a cut had stemmed from increasing headwinds for the Indian economy, especially from higher U.S. trade tariffs. The RBI cut rates by a cumulative 1% so far in 2025.

The rupee slid to record lows this week as U.S. President Donald Trump kept up his criticism of India’s buying of oil from Russia.

Trump said he will outline steeper trade tariffs against India over its relations with Moscow, after slapping New Delhi with 25% reciprocal tariffs last week.

Higher U.S. tariffs stand to further pressure India’s economy, and could invite more monetary easing in the country.

Dollar steadies as Sept rate cut bets persist 

The dollar index and dollar index futures moved little in Asian trade on Wednesday, after sliding from over two month highs in recent sessions.

Markets were seen largely maintaining their bets that the Fed will cut interest rates in September, especially amid growing signs of a cooling labor market. Trump has also repeatedly called on the Fed to cut rates, sparking some discord among members of the central bank’s rate-setting board.

Markets are pricing in a 85.8% chance the Fed will cut rates by 25 basis points in mid-September, CME Fedwatch showed.