Indian Rupee, Asian Currencies Gain as Dollar Hovers Near Six-Week Low

Most Asian currencies strengthened on Wednesday, capitalizing on a U.S. dollar that hovered near a six-week low. The Indian rupee led gains after the country's central bank kept its monetary policy unchanged, as was widely anticipated by markets.

Rupee Strengthens as RBI Holds Rates

The Reserve Bank of India (RBI) announced its decision to leave the benchmark repo rate unchanged at 5.25%, citing persistent inflation, global economic uncertainty, and resilient domestic growth. The central bank’s six-member Monetary Policy Committee (MPC) voted unanimously for the hold and maintained its “neutral” policy stance.

In response to the decision and a sharp fall in crude oil prices, the Indian rupee gained ground. The USD/INR pair fell 0.3% to 95.06. A decline in oil prices is typically beneficial for the rupee, as India is a major importer of crude.

Broad Gains Across Asia on Dollar Weakness

The U.S. Dollar Index, which measures the greenback against a basket of currencies, was little changed at 99.80 after recently touching its weakest point in about six weeks. The dollar's softness provided a tailwind for regional currencies.

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Key currency movements included:

• The South Korean won saw the USD/KRW pair fall by 0.4%.
• The Singapore dollar edged higher, with the USD/SGD pair ticking down 0.1%.
• China's onshore yuan saw the USD/CNY pair dip 0.1%, even as a private survey showed the country's services sector growth slowed to a 10-month low in July.
• The Australian dollar also advanced, with the AUD/USD pair gaining 0.1%.

Yen Holds Firm Following Intervention

The Japanese yen held steady after its sharp gains late last week, with the USD/JPY pair trading 0.2% lower at 157.5 per dollar. The currency's recent stability follows the first joint yen-buying intervention by Japan and the U.S. in decades, a move that pulled the yen back from a 40-year low.

Market participants are now turning their attention to upcoming U.S. non-farm payrolls data, which will be closely watched for clues on the Federal Reserve's future monetary policy path.