Asian currencies generally strengthened on Tuesday, led by a notable recovery in the Indian rupee after Washington and New Delhi announced a long-awaited trade agreement. The Australian dollar climbed modestly as markets prepared for a widely expected monetary policy move by the Reserve Bank of Australia, while the Japanese yen steadied following volatile trading amid uncertainty about potential official intervention.
Other currencies around the region registered modest gains on the day, but remained in the shadow of losses suffered during the prior two sessions when the U.S. dollar advanced after U.S. President Donald Trump nominated Kevin Warsh as the next Federal Reserve chairman.
Indian rupee posts biggest move
The Indian rupee stood out as the strongest performer on Tuesday. The USD/INR pair fell as much as 1.5% to its lowest level since mid-January, reflecting a sharp appreciation in the rupee. The move followed an announcement that the U.S. will reduce tariffs on goods from India to 18% from 50% under the newly revealed trade deal.
In return, the announcement said India will further open its markets and will also curb its purchases of Russian oil. The U.S. president disclosed the agreement via a social media post, but did not provide further specifics such as an effective date or a detailed list of concessions India will implement.
Aussie holds near multi-year highs ahead of RBA decision
The Australian dollar edged higher, with the AUD/USD pair up around 0.2% and trading close to a near three-year high. Market participants were positioned for a widely expected 25 basis point rate increase by the Reserve Bank of Australia later in the day, a move seen as an attempt to rein in a late-2025 resurgence in inflation.
Recent inflation data for the fourth quarter surprised to the upside, with consumer inflation and core measures running well above the RBA’s 2% to 3% annual target range. Beyond the immediate rate move, attention centered on whether the central bank will indicate a fresh tightening cycle. Strength in the labor market and the housing sector were flagged as potential factors that could prompt a hawkish RBA outlook.
Wider regional picture shaped by dollar dynamics
While many Asian currencies drifted higher on Tuesday, they were still recovering from pronounced losses over the previous two sessions as the dollar regained ground. The dollar index and dollar index futures both slipped about 0.1% during Asian trading, yet the greenback remained at an over one-week high as markets digested a less dovish expected trajectory for U.S. monetary policy under the Warsh nomination.
The stronger dollar put pressure on several regional currencies. The yen was among the most affected, with the USD/JPY pair trading back above 155 following worries about whether Japanese authorities might step in to support the currency. The uncertainty surrounding possible intervention contributed to the yen’s earlier whipsawing before it steadied.
Other moves across the region included a 0.3% fall in the USD/KRW pair after January consumer inflation in South Korea printed slightly softer than expected. The USD/CNY pair declined about 0.1% as the Chinese yuan remained an outlier in recent weeks, supported by a sequence of strong daily fixings that had pushed the currency to its strongest levels since mid-2023. The Taiwan dollar was largely flat against the dollar, while the Singapore dollar strengthened slightly as the USDSGD pair edged downward.
Overall, Tuesday’s trading reflected a mix of country-specific catalysts and broader currency market dynamics. The U.S.-India trade announcement delivered an immediate boost to the rupee, the RBA decision loomed large for the Australian dollar, and developments around U.S. monetary policy and Japanese intervention risks continued to shape sentiment across the region.