Investing.com– Most Asian currencies tread water on Friday, while the dollar fell slightly but was on course for a fourth week of gains amid growing bets that the Federal Reserve will hike interest rates again by end-2026.
The Japanese yen weakened slightly on middling household spending data, while the South Korean won was flat in holiday-thinned trade.
Anticipation of U.S. consumer sentiment and inflation expectations data also spurred some caution, while a drop in oil prices offered limited relief.
Cooling Treasury yields helped take some pressure off Asian currencies this week as a rout in the bond market paused. But yields remained close to multi-decade peaks.
Japanese yen edges lower as household spending falls
The Japanese yen’s USD/JPY pair rose 0.1% after government data showed household spending fell for a ninth straight month in August.
Spending fell 3.1% annually, less than expectations for a 3.5% drop, and grew 0.1% month-on-month, less than estimates of 0.5%.
The print came just days after middling wage growth data for August, and raised more questions about strength in Japanese private spending and the economy.
Private spending has persistently slowed this year despite continued government efforts to stimulate growth, which included tax cuts and subsidies on fuel and utilities.
Soft spending may see the Bank of Japan question the need for more interest rate hikes this year, after the central bank raised rates by a cumulative 50 basis points amid growing concerns over sticky inflation.
Other Asian currencies were also largely muted on Friday. The Chinese yuan’s USD/CNY pair fell 0.07%, while the Singapore dollar’s USD/SGD pair fell 0.09%.
The Australian dollar’s AUD/USD pair rose 0.2%.
Indian rupee near record low of 97 as soaring oil offsets hawkish RBI
The Indian rupee’s USD/INR pair rose 0.2% and was in spitting distance of hitting a record high of 97 rupees on Friday, as rising oil prices largely overshadowed hawkish moves by the Reserve Bank of India earlier this week.
While oil cooled marginally on Friday, it remained close to its 2026 highs– a move that bodes poorly for the rupee, given that India imports a bulk of its crude consumption.
The RBI hiked interest rates by 25 basis points earlier this week and switched its monetary stance to calibrated tightening from neutral, citing growing risks from inflation.
The central bank was also seen intervening in currency markets to support the rupee, with the RBI also seen stepping in on Friday to defend the 97 rupee level.
