The Mexican peso has strengthened toward 18 per US dollar, pushing back to July 2024 highs as the dollar softened after the Federal Reserve cut rates and signalled a more dovish path, while investors dialed back expectations for the timing and scale of further easing by the Bank of Mexico following recent price data. The Fed’s 25 basis point move and its plan to buy about $40 billion of short dated Treasuries tightened money market conditions and reinforced bets on more easing next year. Domestically, November headline inflation surprised on the upside at 3.80% year on year and core inflation re accelerated to about 4.43% year on year, a mix that raises the bar for rapid cuts even as growth remains weak. Banxico has already eased policy from earlier peaks but is proceeding meeting by meeting, which keeps real Mexican policy rates relatively attractive versus expected US levels and supports peso inflows tied to yield differentials.

Mexican Peso Hits July 2024 Highs

The dollar index fell to 98.35 on Thursday, an eight-week low, after softer US data that showed initial jobless claims rising more than expected in the week of December 6. The Federal Reserve delivered its third-quarter-point rate cut this year and signaled a less hawkish outlook than markets had anticipated. Traders held to expectations of two cuts in 2026, even though the Fed’s projections pointed to only one. The central bank also announced it will begin buying short-dated Treasury bills to support market liquidity starting December 12, with the initial round totaling approximately $40 billion. Meanwhile, Fed projections now anticipate 2.3% economic growth in 2026, up from 1.8% in September, with 2027 growth at 2%, slightly above prior forecasts. Inflation forecasts were lowered to 2.5% for 2025 and 2.4% for 2026, remaining modestly above the 2% target.

DXY Falls to 8-Week Low

The Brazilian real appreciated to about R$5.44 per US dollar, paring much of the politically driven plunge after Copom’s decision and commentary recast the interest rate outlook and revived carry demand. Copom held the Selic at 15% and delivered a noticeably tougher tone that flagged upside risks to inflation and set a high bar for cuts, which keeps policy on a longer hold path and preserves attractive real rates for yield sensitive investors. November inflation eased to 4.46% year on year, the lowest since September 2024, a development that improves the path toward eventual cuts but is not decisive enough to force immediate easing and so reinforces the central bank’s caution. Reports that the most disruptive political scenarios had softened trimmed the fiscal credibility shock that sparked the initial selloff. Meanwhile, Chair Powell’s remarks were taken as modestly dovish and traders lifted the odds of two or more cuts in 2026 to about 68% which narrowed US Brazil yield gaps.

Brazilian Real Rebounds After BCB

The Turkish lira continued to weaken, hitting fresh record lows above 42.6 per US dollar in December and extending its year-to-date decline to roughly 23%. The currency’s gradual, managed depreciation, ongoing since July 2023, has persisted amid renewed concerns over the country’s political outlook, which continue to dampen investor sentiment. Markets are also watching closely for the announcement of the 2026 minimum-wage increase later this month, as it could influence next year’s inflation dynamics. Turkey’s inflation eased more than expected to 31.07% in November, the lowest level since November 2021. The central bank expects inflation to end 2025 at around 31% and maintained its 2026 forecast at 16%. In December 2025, the monetary authority delivered a fourth consecutive rate cut, reducing borrowing costs by 150 bps, larger than the 100 bps move anticipated by most investors.

Turkish Lira Above 42.6

The Swiss franc edged higher to around 0.799 per USD, hovering near the highest since 2011, after the Swiss National Bank kept interest rates unchanged at 0% for a second straight meeting, as widely expected. The central bank also said the economic outlook has improved slightly following a recent deal to lower US tariffs on Swiss goods.

Swiss Franc Firms Slightly

USDINR increased to an all-time high of 90.56. Over the past 4 weeks, US Dollar Indian Rupee gained 2.2%, and in the last 12 months, it increased 6.72%.

Indian Rupee Hits All-time Low

The Indian rupee weakened past 90 per USD, hitting another fresh record low, pressured by corporate dollar outflows, which added to concerns over the absence of a US-India trade deal. The outflows were driven by Indian companies buying dollars for end-of-year international payments, alongside demand from foreign and local private lenders likely linked to merchant transactions. These limited relief from a softer greenback following the US Fed’s rate cut and less-hawkish-than-expected comments. On the trade front, India’s Commerce Secretary Rajesh Agrawal met US Deputy Trade Representative Rick Switzer in New Delhi for two days of discussions aimed at easing trade tensions, including tariffs related to Russian oil purchases. However, analysts warn that losses in the rupee could deepen if a trade agreement fails to materialize. The currency is on track for its worst annual decline since 2022, pressured by weak portfolio inflows and steep US tariffs on Indian exports.

Indian Rupee Hits Fresh Record Low

The Philippine peso rose to around 59 per dollar, rebounding slightly from record lows, after the Bangko Sentral ng Pilipinas delivered an expected rate cut but signaled it could be the final move in the current easing cycle. BSP Governor Eli Remolona said domestic demand is set for a gradual recovery, adding that any further easing would likely be limited and guided by incoming data. The BSP has cut borrowing costs by 125 bps this year, providing support to consumption and investment. However, a graft scandal involving billions earmarked for flood control projects has restrained state spending, which accounts for about 20% of GDP. The central bank also highlighted a weakened domestic growth outlook, noting that business sentiment remains subdued amid governance concerns and ongoing global trade uncertainties. Still, domestic demand is expected to recover gradually as the effects of monetary easing take hold and public spending improves in both pace and quality.

Philippine Peso Gains as BSP Signals End of Cuts

The Indonesian rupiah slipped to around 16,670 per dollar on Thursday after rising toward 16,630 in the previous session, weighed by modest foreign outflows in early December and cautious sentiment ahead of next week’s final monetary policy decision. Bank Indonesia has signaled potential further rate cuts to support economic growth after back-to-back pauses in October and November, following 150bps of reductions over the past year. The dovish stance has raised concerns over growing inflation risks, particularly from disrupted logistics after the late-November natural disaster in Sumatra Island. Stronger retail sales growth in October and improved consumer sentiment in November helped cap further weakness in the local currency, while forex reserves rose for a second month in November to the highest since August. Globally, the dollar index hovered at a seven-week low after the U.S. Fed delivered its third 25bps cut this year, despite signaling only one more reduction in 2026.

Rate Risks, Natural Disasters Weigh on Rupiah

The offshore yuan steadied around 7.06 per dollar, hovering near its strongest levels in more than a year, supported by broad weakness in the greenback. The US dollar remained under pressure after the Federal Reserve delivered a 25bps rate cut, with Chair Jerome Powell also signaling that a rate hike has been ruled out. Meanwhile, the People’s Bank of China set the daily midpoint at 7.0686 per dollar, its firmest level since October 2024 but 161 pips weaker than Reuters’ estimate. The central bank has been gradually strengthening its official guidance since late April, signaling a cautious openness to further currency appreciation. As a result, the yuan has gained 3.4% year-to-date and is on track for its strongest annual performance since 2020. Market attention is now turning to the upcoming Central Economic Work Conference, where Chinese policymakers are expected to set growth targets for next year and outline key priorities shaping China’s 2026 economic agenda.

Offshore Yuan Steady

The New Zealand dollar slipped to $0.579 but stayed close to a two-month high, amid expectations that the Reserve Bank of New Zealand’s easing cycle may be over. While the central bank cut its cash rate by 25bps last month, its updated projections suggested limited scope for further easing, implying only about a 20% probability of another cut next year as inflation pressures cool and the economic outlook improves. Meanwhile, RBNZ Governor Anna Breman on Wednesday emphasized a continued focus on data dependency and policy flexibility as economic conditions evolve. Currently, markets anticipate that the central bank’s next move will be a rate hike, though not until late 2026. The kiwi also received additional support from a weaker US dollar after the Federal Reserve lowered interest rates by 25bps and presented a less hawkish outlook than some had expected.

New Zealand Dollar Hovers Near 2-Month High

The South Korean won appreciated to around 1,466 per dollar on Thursday, gaining traction after stabilizing for two consecutive sessions as government efforts to ease concerns over capital outflows continued to support the currency. After the Ministry of Trade, Industry, and Resources unveiled a modular trade agreement framework, focus returned to the FX market, with the National Pension Service expected to become more active should the won approach 1,480 to 1,500. Optimism was bolstered as confidence grew in additional foreign exchange management measures. Adding to the momentum, exports surged 17.3% year-on-year in the first 10 days of December, driven by robust global demand for semiconductors, with shipments reaching $20.58 billion, up from $17.54 billion a year earlier. Separately, sentiment was also supported as the US central bank lowered its key interest rate to 3.5–3.75 percent, narrowing the gap between US and South Korean key rates to as much as 1.25 percentage points.

South Korean Won Strengthens on FX Measures, Trade Gains

The Japanese yen strengthened toward 155.5 per dollar on Thursday, extending gains from the previous session as the dollar weakened sharply after the US Federal Reserve delivered its third rate cut of the year and signaled a less hawkish outlook than markets anticipated. Investors are also eyeing next week’s Bank of Japan policy meeting, where markets anticipate a rate hike after Governor Kazuo Ueda said the central bank is getting closer to attaining its inflation target. Attention will focus on Ueda’s post-meeting comments for guidance on 2026 policy. Despite recent gains, the yen remains pressured by Japan’s slow growth, fiscal challenges, and wide interest rate gaps with other major economies, as domestic rates remain among the lowest globally. On the data front, business sentiment among large manufacturers rose to a one-year high in the three months to December.

Yen Gains on Dollar Weakness

The Australian dollar held steady around $0.667 on Thursday, trading near a three-month high, as investors weighed the latest labor market figures for clues on the Reserve Bank’s policy direction. The economy unexpectedly lost 21,300 jobs in November, driven entirely by full-time positions, while fewer people entered the workforce, keeping the unemployment rate steady at 4.3%. The softer-than-expected data suggest a gradual easing in the labor market, prompting traders to push back expectations for rate hikes to the second half of 2026, from earlier bets on May. However, the central bank still views the labor market as tight, pointing to high job vacancies, widespread staffing shortages, rising labor costs, and indicators that the economy remains near full employment. Elsewhere, the Aussie found support from a weaker US dollar after the Federal Reserve lowered rates by 25 basis points, while Chair Powell’s post-meeting comments surprised markets expecting a more hawkish tone.

Australian Dollar Steady at 3-Month High

The dollar index slipped to around 98.5 on Thursday, its lowest in over seven weeks after the Federal Reserve delivered its third quarter-point rate cut this year, in line with expectations. The Fed also signaled a less hawkish outlook than markets had anticipated and Chair Jerome Powell suggested a rate hike is off the table, prompting traders to price in two additional rate cuts in 2026. However, the Fed’s dot plot points to just one more 25-bps reduction next year. The central bank also announced it will begin buying short-dated Treasury bills to support market liquidity starting December 12, with the initial round totaling approximately $40 billion. Meanwhile, Fed projections now anticipate 2.3% economic growth in 2026, up from 1.8% in September, with 2027 growth at 2%, slightly above prior forecasts. Inflation forecasts were lowered to 2.5% for 2025 and 2.4% for 2026, remaining modestly above the 2% target.

Dollar Languishes on Dovish Fed Outlook

The Chinese Yuan touched 7.05 against the USD, the highest since October 2024. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.81%, and in the last 12 months, it decreased 3.04%.

Chinese Yuan Hits 14-month High

The Canadian dollar appreciated past 1.38 per US dollar, reaching twelve-week highs as markets balanced the anticipated Fed cut with a relatively hawkish Bank of Canada stance and firmer domestic data. The market focus shifted to the US Fed guidance which leaned more hawkish as the committee pencilled in only one additional cut next year, yet Powell’s discussion about whether to stop now or to cut “a little” or “more than a little” was seen as leaving the door open to further easing and pushed traders to lift the odds of two or more cuts in 2026 to about 68% which narrowed US Canada yield gaps. Earlier, the BoC left the policy rate at 2.25% and reiterated that the current stance is about right after a surprising Q3 GDP print of 2.6% annualized and a tighter labour market with unemployment near 6.5% which reduces near term easing odds and supports CAD.

Canadian Dollar Strengthens to 12-Week Highs

GBPUSD increased to 1.34, the highest since October 2025. Over the past 4 weeks, British Pound US Dollar gained 1.76%, and in the last 12 months, it increased 4.95%.

British Pound Hits 7-week High

The British pound surged past $1.33, hovering at its strongest level since October 22, supported by broad dollar weakness and diminished expectations for further Bank of England easing in 2026. The US Federal Reserve delivered the anticipated rate cut while signaling a likely pause in January as policymakers await additional data to assess the economic outlook. Expectations for next week’s BoE decision remain largely unchanged, with roughly an 84% chance of a rate cut priced in, despite signs of accelerating wage growth and persistent inflationary pressures. Markets are now almost fully pricing in a second 25-basis-point cut by June, with about a 75% probability of it occurring in April. Investors now await key UK monthly GDP data due on Friday, which could further influence market expectations.

Pound Climbs Above $1.33

The euro climbed toward $1.17, bolstered by broad dollar weakness, firmer rhetoric from European Central Bank officials, and progress on France’s 2026 social-security budget. The US Federal Reserve delivered the expected rate cut while signaling a likely pause in January as policymakers await additional data to assess the economic outlook. Meanwhile, investors pared back expectations for additional ECB easing after officials signaled that further cuts may not be necessary in 2026. President Christine Lagarde indicated that the central bank will raise Eurozone growth projections next week, as the economy shows resilience amid ongoing trade tensions. In France, political risks eased slightly after the National Assembly narrowly approved next year’s social-security bill, providing a temporary boost to Sébastien Lecornu’s minority government as attention now turns to the uncertain passage of the broader state budget.

Euro Rises Amid Dollar Slump

The dollar index dropped below 99.0 on Wednesday, moving closer to its lowest level since late October, after the Federal Reserve delivered the anticipated 25-basis-point rate cut but pointed to only one rate reduction in 2026. More notably, a tweak in the Fed’s statement, citing “the extent and timing of additional adjustments”, suggests officials are likely to pause further cuts in January as they wait for additional data to better assess the economic outlook. The latest projections show a meaningful upgrade to the growth outlook. Policymakers now expect the economy to expand 2.3% next year, up from the 1.8% forecast in September. Growth in 2027 is also seen slightly higher, at 2% versus 1.9% previously. Meanwhile, the Fed lowered its inflation forecasts for 2025 to 2.5% from 2.6% and for 2026 to 2.4% from 2.6%, though both remain above the central bank’s 2% target.

Dollar Index Slips as Fed Cuts Rates

The Canadian dollar held above 1.38 per US dollar, easing from two-month highs of 1.38 reached on December 5 as investors digested the Bank of Canada decision and guidance. The Bank of Canada’s December hold at 2.25% reiterated that policy is about right because growth and labour market surprises have narrowed slack. Third-quarter GDP surprised to the upside with annualized growth of 2.6% and the labour market added significant jobs as the unemployment rate fell to about 6.5%. Those developments reduce the near-term odds of easing and tilt the balance toward later tightening if underlying inflation proves persistent. On the other hand, oil, Canada’s largest export price, has eased from its early-December spike, removing a key terms-of-trade tailwind for the loonie. The Bank also flagged that recent GDP strength largely reflected volatile trade and that fourth-quarter growth may be weaker, undercutting confidence in a durable domestic upswing.

Canadian Dollar Eases After BoC Decision

The Mexican peso traded around 18.20 per US dollar, near its strongest level since July 2024 of 18.17 seen December 5th, as investors dialed back the timing and the scale for further monetary policy easing by the Bank of Mexico after the latest price data. Mexico’s November headline inflation surprised on the upside at 3.80% year on year and core inflation re-accelerated to about 4.43% year on year, a combination that raises the bar for rapid easing by the central bank even as growth remains weak. At the same time Banxico has already eased policy from earlier peaks but adopted a deliberately cautious meeting-by-meeting stance after recent cuts which leaves real Mexican policy rates relatively attractive versus expected US levels and therefore supports peso inflows tied to yield differentials. Meanwhile the US dollar remains broadly subdued amid growing expectations of a more dovish Federal Reserve.

Mexican Peso Near July 2024 Highs

The Brazilian real weakened past 5.45 per US dollar to eight-week lows as uncertainty over the timing of Brazil’s rate cuts, the political shock to fiscal credibility, and more attractive foreign yields pressured the currency. November headline inflation eased to 4.46% annually, the lowest since September 2024, improving the path toward future cuts but not enough to ensure them, keeping Copom on track to hold at 15% and leaving traders debating how soon easing will begin. Political risk has also resurfaced after the return of “Flávio Bolsonaro risk” alongside congressional efforts to reduce sentences for those involved in January 8, reigniting doubts about the sustainability of a market friendly opposition and the broader fiscal outlook. At the same time US Treasury yields remain elevated, raising the opportunity cost of holding reais just as markets struggle to gauge the pace of Fed easing, making flows into high yielding emerging markets riskier.

Brazilian Real Drops to Lowest in 8-Weeks

The euro steadied above $1.165, supported by broad dollar weakness ahead of the Federal Reserve’s policy announcement, firmer rhetoric from ECB officials, and progress on France’s 2026 social-security budget. The Fed is widely expected to deliver a 25 bp rate cut today, though uncertainty over the policy path for 2026 remains high, placing added focus on the updated FOMC economic projections. At the same time, investors scaled back expectations for additional ECB easing after Governing Council member Simkus told Bloomberg the central bank does not need to cut rates further with inflation “more or less” at target, comments that echoed similar remarks from Schnabel earlier in the week. In France, political risk eased slightly after the National Assembly narrowly approved next year’s social-security bill by a margin of 13 votes, offering a temporary boost to Sébastien Lecornu’s minority government as attention now shifts to the still-uncertain passage of the broader state budget.

Euro Holds Firm Above $1.165 as Markets Await Fed Decision

The Indonesian rupiah weakened around 16,690 per dollar on Wednesday, reversing gains from the prior session as investors turned cautious ahead of next week’s final monetary policy decision of the year. In November, Bank Indonesia kept its benchmark rate unchanged at 4.75% for a second consecutive month after delivering a total 150bps of cuts since September 2024, but signaled there may still be room for further easing to support economic growth, which Governor Perry Warjiyo said remains below potential. Fresh data showing October retail sales rose the most in three months failed to lift sentiment, as traders remained focus on rising inflation risks linked to logistics disruptions caused by severe floods and landslides in Sumatra in late November. Externally, the dollar index held near 99.2 as markets awaited the Fed’s rate decision later today, with expectations of a 25bps cut but the possibility of a hawkish guidance that could limit downside pressure on the greenback.

Rupiah Softens to Near 16,690

The offshore yuan held its gain around 7.06 per dollar on Wednesday, as elevated consumer inflation tempered expectations of further monetary policy support. China's consumer prices increased 0.7% year-on-year in November 2025, marking the highest reading since February 2024. Earlier this week, the Politburo pledged to expand domestic demand and support the broader economy in 2026, albeit signaling a cautious approach to stimulus. Meanwhile, producer deflation unexpectedly worsened to 2.2% in November, marking the 38th straight month of falling producer prices. Beijing has vowed to curb what it describes as “disorderly” price competition, but progress has been slow amid fears that stronger regulatory action could lead to job losses or threaten already fragile growth. Market attention now turns to the upcoming Central Economic Work Conference, where officials are expected to set next year’s growth targets and outline the policy priorities that will guide China’s economic agenda in 2026.

Offshore Yuan Holds Gains

The Japanese yen traded near 157 per dollar on Wednesday after a sharp three-day decline, even as Bank of Japan Governor Kazuo Ueda said the central bank is getting closer to attaining its inflation target, hinting at a potential near-term rate hike. Markets are pricing in a possible BOJ rate increase next week, with attention focused on Ueda’s post-meeting comments for guidance on policy plans next year. The currency also faced pressure from growing concerns over Japan’s fiscal health amid Prime Minister Sanae Takaichi’s expansive spending plans. Additionally, wide interest rate differentials between Japan and other major economies encouraged bearish bets, as domestic rates remain among the lowest globally. The yen weakened across the board, sinking to record lows against the euro.

Yen Weakens Despite Hawkish BOJ Signals

The Australian dollar traded around $0.664, hovering close to its highest level in nearly three months, supported by the Reserve Bank’s hawkish monetary policy outlook. The central bank held cash rates steady as widely expected at its December meeting, while Governor Michele Bullock took markets by surprise with a sharply hawkish shift on rates by ruling out further cuts and signaling the possibility of rate hikes as soon as February if inflation fails to ease. The RBA still emphasized there is no preset policy path, with future adjustments depending on the inflation outlook. Markets quickly priced in a 30% chance of a 25-basis-point hike at the RBA’s February meeting, rising to nearly 100% by May. Rising local bond yields also drew carry traders, adding further upside to the currency. Investors are now focused on Australia’s November jobs data due Thursday, while globally, markets await the US Federal Reserve’s policy decision later today, with expectations for a 25 bps cut.

Australian Dollar Nears 3-Month High

The dollar index held steady around 99.2 on Wednesday after a two-day advance, as investors braced for the latest Federal Reserve policy decision, where it is widely expected to deliver its third 25 basis point rate cut this year. However, policymakers remain divided, with some pushing for further easing to support a cooling market while others warn that cutting too quickly could risk reigniting inflation. Markets will also scrutinize Chair Jerome Powell’s post-meeting remarks for clues on the 2026 rates path. Data on Tuesday showed US job openings rose by 12,000 to 7.670 million in October, following a 431,000 increase to 7.658 million in September, with both figures exceeding expectations of 7.2 million. Separately, the weekly ADP employment report indicated the US private sector added an average of 4,750 jobs per week in the four weeks ending November 22, rebounding after three straight periods of declines.

Dollar Holds Steady Ahead of Fed Decision

The dollar index rose above 99.2 on Tuesday as investors digested stronger-than-expected US labor market data ahead of the Federal Reserve’s policy meeting. Job openings increased by 12,000 to 7.670 million in October, following a 431,000 jump to 7.658 million in September, with both readings surpassing expectations of 7.2 million. Meanwhile, the weekly ADP employment report showed the US private sector added an average of 4,750 jobs per week in the four weeks ending November 22, rebounding after three consecutive periods of declines. These labor market gains complicate the Fed’s policy outlook. Markets currently price in about an 87% chance of a 25-basis-point rate cut on Wednesday, up from roughly 67% a month ago. However, the 2026 outlook remains uncertain, with analysts expecting a “hawkish cut”, in which Chair Jerome Powell signals caution on further easing amid persistent inflationary pressures.

Dollar Climbs on Stronger Job Data

The Brazilian real depreciated past 5.45 per US dollar to eight-week lows as renewed political uncertainty reignited fiscal concerns and raised broader questions about the sustainability of fiscal responsibility. Senator Flávio Bolsonaro’s return to pre candidacy restored a sizable political risk premium and intensified doubts about the opposition’s cohesion and the durability of any market friendly fiscal compact, prompting foreign investors to trim real exposure. At the same time markets are positioning ahead of two major policy events this week, the BCB’s Copom decision on Selic and the Federal Reserve announcement in the United States, leading dealers to hold liquidity until there is clearer guidance on rates and interest differentials. Domestic data have not helped sentiment since Focus survey readings only nudged inflation and growth expectations slightly, keeping forecasts for a high Selic unchanged while leaving real rates exposed to compression if future cuts gain traction.

Brazilian Real Tumbles to 8-Week Lows

The South African rand edged lower to around 17.1 per USD, with investors focused on the ANC’s 5th National General Council (NGC) amid speculation over internal efforts to unseat President Cyril Ramaphosa. With local government elections potentially taking place as early as next November, the ANC is meeting this week to assess its recent performance. President Ramaphosa delivered a firm message at the NGC on December 8, urging members to end internal divisions and warning that factional battles are weakening the party. On a more positive note, South Africa raised ZAR 11.8 billion in its first infrastructure-bond sale, signaling strong investor appetite and marking a significant step toward unlocking long-term funding for public infrastructure.

South African Rand Slightly Weaker

The Mexican peso eased toward 18.3 per US dollar, retreating from its strongest level since July 2024 of 18.17 seen December 5th, as rising US yields and a narrowing Mexican yield premium pushed demand into dollars. The 10-year US Treasury yield climbed above 4.15% which made dollar assets relatively more attractive to global investors. At the same time markets expect Banco de México to continue easing after a string of cuts this year and markets now see the policy rate drifting to the mid 7% area, a shift that reduces Mexico’s carry advantage. Headline inflation printed 3.80% November 2025 which complicated the timing and size of future easing but did not stop markets from pricing additional cuts, compressing real rates and leaving the peso more vulnerable. Recent downward revisions to domestic activity and weaker growth prospects have further trimmed the case for fresh capital inflows.

Mexican Peso Gives Back Over 1-Year High

The Indonesian rupiah firmed toward 16,680 per dollar on Tuesday, snapping a three-day losing streak after briefly climbing above 16,700. Support strengthened after Bank Indonesia reiterated confidence in the external sector, citing resilient exports and stable foreign inflows. The central bank kept its policy rate at 4.75% in November for a second straight meeting after 150bps of cuts since September 2024, while signaling a near-term focus on currency stability and smoother policy transmission. Further support came as consumer confidence rose for a second month to a nine-month high in November, helped by expanded year-end cash handouts. However, gains were capped as traders turned cautious ahead of October retail sales data following five months of growth. Inflation risks also lingered due to logistics disruptions from late-November floods and landslides in Sumatra. Globally, the dollar index was steady as investors awaited the Federal Reserve’s final policy meeting of the year.

Rupiah Halts 3-Day Decline

The Australian dollar rose to around $0.663 on Tuesday, rebounding from the previous session as market sentiment improved following the Reserve Bank of Australia’s latest monetary policy decision. The central bank left its cash rate unchanged at 3.60% for a third consecutive meeting, as widely expected. The decision was unanimous, with policymakers noting that price pressures have begun to re-emerge and the labour market remains tight. Moreover, the Reserve Bank reiterated that any future policy adjustments will depend on incoming economic data. Looking ahead, markets are pricing roughly even odds of a rate increase as early as May 2026, while most economists now consider the easing cycle to be over, having previously expected at least one additional cut to 3.35%. Meanwhile, investors will also be watching closely as Governor Michele Bullock holds a press conference later today, seeking further signals on the central bank’s policy trajectory.

Australian Dollar Rises on RBA Decision

The New Zealand dollar hovered around $0.578, holding at its highest level in over five weeks, supported by expectations that the Reserve Bank’s easing cycle has likely come to an end. While the central bank recently cut rates by 25 bps as expected, its latest forecasts suggested limited scope for further easing, assigning just a one-in-five chance of another cut next year as inflation pressures cool and the economic outlook improves. This view echoes remarks from newly appointed Governor Anna Breman, who stated that recent rate cuts should help support growth and employment, while emphasizing that controlling inflation remains a priority, particularly to protect the purchasing power of lower-income households. As a result, markets are increasingly pricing in the central bank’s next move as a rate hike, though not until late 2026. The antipodean currency is also supported by a softer US dollar, as markets anticipate a Federal Reserve rate cut this week.

Kiwi Dollar Hovers Near Five-Week High

The offshore yuan remained steady around 7.07 per USD, holding near one-year highs, with markets focused on the upcoming Central Economic Conference for cues on 2026 policy direction. Beijing’s year-end economic gathering, where officials are expected to outline next year’s priorities for the world’s second-largest economy, will be shoring up resilience ahead of renewed strategic tensions with the US, reflected in China’s push to reduce dependence on foreign technology. At the same time, investors will watch for signals on how policymakers plan to tackle domestic headwinds. The Politburo has recently reaffirmed the need to bolster demand, as the property downturn and a soft labor market continue to weigh on activity. Meanwhile, economic indicators remained uneven, where growth has outperformed expectations and exports have held up despite US trade pressures. However, deflation persists and business and consumer sentiment are still subdued.

Yuan Holds Firm Ahead of Key Economic Meeting

The South Korean won steadied to around 1,470 per dollar, attempting to recover from multi-month lows after the Finance Ministry announced that it is forming a dedicated task force under its international finance bureau to address sustained currency weakness. The group is expected to track exporters’ currency conversions and overseas investments, review incentives for faster dollar repatriation, adjust tax exemptions on foreign dividends, and tighten oversight of brokerage firms amid concerns over leveraged offshore products. The initiative comes as the won has stayed below 1,450 per dollar, pressured by domestic outbound investment and foreign profit-taking. Separately, investor sentiment was tempered as markets awaited the outcome of the US Federal Reserve’s two-day policy meeting, with caution rising over whether the central bank would implement the widely expected 25-basis-point rate cut.

Won Steadies as Policy Support Eyed

The Japanese yen steadied around 155.8 per dollar on Tuesday after coming under pressure overnight following a magnitude-7.5 earthquake on Japan’s northeast coast, which briefly raised concerns about economic disruptions. A downward revision to Japan’s Q3 GDP also weighed on the currency, supporting Prime Minister Sanae Takaichi’s large spending plans and complicating the Bank of Japan’s policy decision next week. The central bank is expected to raise interest rates this month amid a gradual path to policy normalization. Investors now await remarks from Bank of Japan Governor Kazuo Ueda at a London event later today for signals on the policy path. Meanwhile, traders are preparing for a likely 25 basis point rate cut from the US Federal Reserve this week, though bets on further Fed easing in 2026 have eased.

Yen Stabilizes After Sharp Drop

The dollar index held around 99 on Tuesday, trading sideways so far this week as investors braced for the start of the Federal Reserve’s two-day policy meeting, where it is widely expected to lower rates. Markets are currently pricing in about an 87% chance of a 25 basis point cut on Wednesday, up from roughly 67% a month ago. Still, the outlook for 2026 remains uncertain, with analysts expecting a “hawkish cut” in which Chair Jerome Powell signals caution on further easing. Investors are also watching key US data this week, including the delayed October JOLTS report due later today, along with weekly jobless claims and trade figures later in the week. Attention is also on upcoming policy decisions from central banks in Australia, Canada and Switzerland, all of which are expected to keep rates on hold.

Dollar Steadies Ahead of Fed Meeting

The Brazilian real steadied around 5.44 per US dollar, struggling to recover from last week’s sharp selloff as investors monitor the impact of political election uncertainty on fiscal sustainability and risk. Over the weekend Senator Flávio Bolsonaro signalled he may withdraw his candidacy which eased the immediate risk premium, yet his warning that any exit would come at a price has only prolonged uncertainty about the opposition’s cohesion and whether a market friendly fiscal compact can hold. At the same time the market is sitting on two major policy events this week the Central Bank Copom decision on Selic and the Federal Reserve decision in the United States so dealers are trimming positions and awaiting clearer guidance on rates and interest differentials. Finally, Focus survey readings only nudged inflation forecasts marginally lower while keeping Selic expectations high so the carry advantage remains strong but is not enough to offset renewed political risks.

Brazilian Real Struggles to Recover

The Brazilian real rebounded past 5.40 per US dollar as political uncertainty that shocked markets last week eased and macro signals turned mildly supportive. Over the weekend Senator Flávio Bolsonaro signalled he may withdraw his candidacy, removing the heavy risk premium that had split the opposition and threatened a market-friendly fiscal compact. At the same time, the weekly Focus survey nudged year-end inflation estimates marginally lower and lifted GDP forecasts, strengthening the case that the Selic can remain at current historic restrictive levels rather than prompt disruptive fiscal responses. Finally, the US dollar remained broadly subdued amid near certainty the Federal Reserve is due to cut rates later this week, amplifying Brazil’s carry trade advantage.

Brazilian Real Rebounds After Election Shock

Sterling stabilized around $1.33 following last week’s rally, remaining close to a six-week peak of $1.339 hit on Thursday, as investors paused to assess policy outlooks from both the Bank of England and the Federal Reserve. Expectations for next week’s BoE rate decision have changed little, with roughly an 84% chance of a cut priced in, despite accelerating wage growth. A Recruitment & Employment Confederation/KPMG survey showed starting pay for permanent staff rose at the fastest pace in five months, while hiring slowed and the pool of jobseekers expanded. Markets are now nearly fully pricing a second 25bps cut by June, with about a 75% chance of it occurring in April. In the US, the Federal Reserve is expected to deliver a 25-basis-point cut on Wednesday, though focus will remain on updated FOMC projections amid lingering uncertainty over the 2026 policy path.

Sterling Holds Near Six-Week High

The euro held steady just above $1.165, hovering near its strongest level since mid-October, as traders absorbed hawkish comments from ECB Executive Board member Isabel Schnabel while awaiting a widely expected Federal Reserve rate cut later this week. Schnabel said she is comfortable with market bets that the ECB’s next policy move could be a rate increase, noting that risks to both growth and inflation are now tilted to the upside. She also suggested that updated economic projections in December may be revised higher. Her remarks, combined with resilient economic activity and inflation running close to target, reinforced expectations that the ECB is likely to keep rates unchanged through 2026. Across the Atlantic, US markets are pricing in roughly a 90% chance that the Fed will deliver a 25-basis-point cut on Wednesday, with investors looking for an additional two to three cuts next year as recent data continues to indicate a cooling labor market.

Euro Holds Firm on ECB Hawkishness

The Indonesian rupiah weakened around 16,700 on Monday, extending losses for a third session amid modest foreign outflows in the first week of December. Sentiment also turned cautious ahead of key domestic data releases this week, including November consumer mood and October retail sales. Bank Indonesia recently signaled room for further rate cuts, even after lowering borrowing costs by 150bps since September 2024, including back-to-back moves in October and November. The dovish stance has raised concern as inflation risks may rise in the coming months due to disrupted logistics following late-November floods and landslides in Sumatra, among the country’s most damaging natural disasters in more than a decade. Still, stronger November forex reserves, which rose for a second month to a three-month high, helped limit further downside. Externally, the dollar index held losses as expectations grew that the Federal Reserve would cut rates this week amid cooling U.S. labor markets.

Rupiah Slips for 3rd Session

The offshore yuan steadied around 7.06 per dollar on Monday, with market sentiment remaining subdued amid strong foreign demand and weak domestic activity. Exports rose 5.9% year-on-year to USD 330.3 billion in November 2025, surpassing expectations and rebounding from the previous month, supported by eased trade tensions with the US. Imports, however, increased only 1.9% to USD 218.7 billion, missing forecasts and highlighting continued weakness in domestic demand. China’s trade surplus widened to USD 111.7 billion in November from USD 97.3 billion a year earlier, above the anticipated USD 100.2 billion and marking the largest surplus since June. The historic surplus is expected to support GDP growth after months of slowdown, signaling that China remains on track to meet its official annual growth target of around 5%. Meanwhile, investors are now watching this week’s inflation data for insights into China’s monetary policy and economic outlook.

Offshore Yuan Steady After Trade Data

The South Korean won strengthened to around 1,467 per dollar on Monday, recovering from multi-month lows as sentiment was bolstered by recent domestic developments. Finance Minister Koo Yun-cheol highlighted that, following the budget’s approval, government ministries are initiating measures to reinforce economic growth. Last week, the National Assembly ratified the 2026 government budget at KRW 727.9 trillion, directing increased spending to stimulate economic activity and bolster national defense. Investor sentiment was further supported as South Korean and Japanese business lobbies issued a joint statement pledging closer cooperation in artificial intelligence, semiconductors, and other shared structural priorities. Separately, investors positioned ahead of the Federal Reserve’s two-day policy meeting this week, with markets largely anticipating a 0.25 percentage point cut in the 3.75%–4.0% funds rate.

Won Strengthens on Budget Approval, Policy Optimism

The Japanese yen appreciated past 155 per dollar on Monday, reaching three-week highs amid growing speculation that the Bank of Japan could raise interest rates next week following hawkish signals from policymakers. Traders are also betting that Prime Minister Sanae Takaichi’s government would support a stronger yen, which has been pressured partly by delayed rate hikes, to counteract the impact of higher import costs on inflation. Meanwhile, data showed real wages fell for the tenth consecutive month in October, and Q3 economic growth contracted more sharply than initially reported, adding complexity to the rates outlook. Externally, the yen gained further support from broad dollar weakness amid expectations that the US Federal Reserve will deliver a quarter-point rate cut this week.

Japanese Yen Firms Up on BOJ Hike Bets

The dollar index traded below 99 on Monday after two consecutive weeks of declines, pressured by expectations that the Federal Reserve will cut interest rates this week. Markets are pricing in about an 88% chance of a 25 basis point cut on Wednesday, up from roughly 67% a month ago. However, the rate outlook for 2026 remains uncertain, with analysts expecting a “hawkish cut” in which Chair Jerome Powell may signal a more cautious path for additional easing. This week’s key US data includes the delayed October JOLTS report on Tuesday, which will provide fresh insights into hiring trends, layoffs and worker quit rates. Investors are also watching policy decisions from central banks in Australia, Brazil, Canada and Switzerland, though all are expected to keep rates on hold.

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