Asian markets opened Thursday’s session mostly higher, supported by a rebound in technology stocks on Wall Street and growing investor conviction that the U.S. Federal Reserve is leaning toward a rate cut next month. This shift in expectations has steered liquidity toward growth-sensitive assets, although performance varied across Asian markets.
Currency markets in Asia moved within tight ranges, as traders awaited the Fed’s decision amid increasingly priced-in rate-cut expectations. Recent volatility failed to produce clear directional trends, keeping most currencies in narrow channels, except for the Australian and New Zealand dollars, which moved on strong domestic fundamentals.
Japan’s Nikkei 225 and TOPIX posted gains, supported by technology shares and a rebound in SoftBank of more than 3% from a two-month low. The easing of diplomatic tensions between Tokyo and Beijing also helped sentiment, even though Japan’s domestic fundamentals remain tied to its ultra-loose monetary policy.
Expectations of a U.S. rate cut surged to roughly 84% following weak readings in retail sales and producer price inflation, reinforcing the view that price pressures are gradually easing. However, policymakers’ insistence on a “meeting by meeting” approach has kept markets cautious. The political layer adds further uncertainty, as Kevin Hassett is seen as a serious contender for the Fed chair a figure associated with more accommodative monetary policy, which could reshape market outlooks for next year.
The U.S. dollar entered the end of the week under mounting pressure, on track for its largest weekly loss in four months. Thin liquidity ahead of Thanksgiving facilitated the move, but the real driver is that markets are now looking toward 2026 a year in which the United States appears to be the only major economy preparing for aggressive rate cuts, in contrast to tighter policy prospects in Asia and Oceania.
The dollar index stabilized near 99.4 after retreating from a six-month high, with the “strong dollar” narrative losing momentum. If Kevin Hassett a prominent advocate of rate cuts becomes the next Fed chair, the currency could face further pressure. With institutional demand typically fading by late November, the dollar heads into a far more complex monetary environment, competing against currencies with genuine domestic drivers rather than short-term speculation.
The yen steadied after earlier declines, following reports that the Bank of Japan may consider a rate hike soon. The potential move is not only about addressing yen weakness but also about easing political pressures that have sustained ultra-loose policy for years. Any concrete action from the central bank would alter the risk profile in the medium term.
A stronger than expected consumer inflation reading in Australia reshaped monetary expectations, prompting traders to scale back bets on further rate cuts. This supported a continued rally in AUD/USD, as markets priced in the likelihood that the Reserve Bank of Australia will avoid easing while inflation remains elevated.
Despite cutting rates by 25 basis points, the Reserve Bank of New Zealand signaled that the easing cycle is essentially over. Its forecast for a 2.20% rate in Q1 2026 effectively closed the door to additional cuts, which investors interpreted as a message of monetary stability propelling the New Zealand dollar sharply higher.
In summary, Asian currencies continue to trade under two distinct forces:
• Global drivers tied to the timing of Fed decisions and potential changes in its leadership.
• Local fundamentals such as Australia’s inflation dynamics and New Zealand’s monetary stance.
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