Investing.com– Asian currencies were largely steady on Friday after the U.S. dollar retreated from an 18-month high amid a rally in U.S. Treasuries, while the Indian rupee was poised for sharp weekly gains following measures by the Reserve Bank of India to curb dollar demand.
Most Asian currencies were on track for subdued weekly performance, while the dollar was set for its first weekly fall in five weeks.
The US Dollar Index was last down 0.1% at 101.982 by 23:57 ET (03:57 GMT), set to fall 0.2% for the week. The dollar eased after hotter-than-expected U.S. inflation data initially lifted it to its highest level since early 2025.
A decline in U.S. Treasury yields helped weaken the dollar’s appeal, as investors sought the relative safety of government bonds amid concerns about the sustainability of artificial intelligence-related investment and debt financing.
The benchmark 10-year yield fell to around 5.09% on Thursday, to its lowest since Sept. 23.
Asia FX set for muted week
The Japanese yen’s USD/JPY pair was largely muted, set for a 0.3% weekly loss.
The Chinese yuan’s onshore USD/CNY and offshore USD/CNH pairs were largely unchanged.
The South Korean won’s USD/KRW pair edged up 0.1%, headed for a 0.2% weekly rise after large swings earlier this week.
Currency movements remained vulnerable to shifts in U.S. yields and expectations for the Fed’s next policy decision.
Investors were also watching for signals from Fed Chair Kevin Warsh at an International Monetary Fund event in Bangkok.
Markets are pricing in a roughly 28% chance of a rate hike this month, while the probability of a December hike sits at 66%, according to CME FedWatch.
Indian rupee set for 2% weekly jump on RBI intervention
The Indian rupee, meanwhile, stood out as the region’s strongest performer.
The USD/INR pair fell 0.2% to below 95 rupees, and was set for a 1.9% weekly jump after approaching record lows near 97 rupees last week.
Indian central bank has introduced measures to discourage speculative dollar demand, including tighter requirements for certain foreign-exchange derivative transactions and a special window allowing state-run oil companies to purchase dollars directly from the RBI.
However, the measures have also disrupted liquidity in the rupee forward market, with higher hedging costs and uncertainty over transaction rules complicating trading, reports showed. The RBI subsequently clarified aspects of the new requirements.
