Yen Retreats and Rupiah Nears Record Low as Dollar Firms Ahead of Fed

Asian currencies showed a mixed performance on Tuesday as the U.S. dollar maintained its recent strength ahead of a pivotal Federal Reserve policy decision. The Japanese yen surrendered some of its recent safe-haven gains, while the Indonesian rupiah continued to trade near record lows amid sustained selling pressure.

The U.S. dollar index, a measure of the currency against a basket of peers, was up 0.09% at 102.05. Investor focus is squarely on the Federal Reserve's policy announcement due Wednesday, with the central bank widely expected to keep interest rates unchanged. This anticipation has provided underlying support for the dollar.

Yen Reverses Course, Rupiah Under Pressure

The Japanese yen weakened against the dollar, with the USD/JPY pair rising 0.13% to 157.70. The move marks a reversal from last week when the yen strengthened as investors sought safer assets amid concerns over high valuations in artificial-intelligence-related stocks. That risk-off sentiment has since eased, leaving the yen vulnerable ahead of the Bank of Japan's two-day meeting that concludes Friday, where it is expected to hold its policy rate at 1.25%.

Meanwhile, the Indonesian rupiah remains one of Asia's weakest-performing currencies. The USD/IDR pair rose 0.19% to 18,129.1, pushing the rupiah closer to its historic low. The currency has depreciated around 8% against the dollar this year, weighed down by persistent foreign capital outflows, elevated global bond yields, and concerns that index provider MSCI may reclassify Indonesia from its emerging-market benchmark.

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Bank Indonesia has pledged to stabilize the currency, recently holding its benchmark rate at 5.75% while opting for other policy tools. These include direct currency intervention and raising its deposit facility rate to 5.00% to attract foreign capital.

Mixed Performance Across Other Asian Currencies

Performance was varied elsewhere in the region as traders positioned themselves for a busy week of central bank announcements.

• The South Korean won strengthened, with the USD/KRW pair falling 0.1% to 1,324.36.
• The Chinese yuan was largely steady, with the offshore USD/CNH pair trading around 6.6678.
• The Australian dollar gained 0.1% to $0.7025, while the New Zealand dollar rose 0.3% to $0.5695.
• The Indian rupee and Singapore dollar both edged lower against the greenback.