Ahead Today
G3: US initial jobless claims and CPI, ECB policy rate decision
Asia: Taiwan policy rate decision
Market Highlights
The broad US dollar (DXY) remains soft despite a modest uptick. Fed governor Waller commented that inflation could moderate in the next few months and suggested that the Fed could cut rates at a moderate pace by 50-100 basis points, bringing the policy rate down to below 3% - a level that will not slow growth.
On the geopolitical front, the US has threatened to impose new sanctions on Russia if President Putin rejects a proposed peace deal. Coupled with Trump’s earlier directive to block sanctioned oil tankers entering and leaving Venezuela, these developments have contributed to the near-term rebound in oil prices.
In Japan, core machinery orders (excluding volatile orders for ships and electric power companies) rose 12.5%yoy in October, beating Bloomberg consensus of 3.6%yoy. On a month-on-month basis, orders jumped 7%, reinforcing the case for the BoJ to raise rates this Friday. Despite this strong data, the yen fell 0.6% against the US dollar. With markets already pricing in a potential BoJ hike, forward guidance on the policy path will be critical for shaping the yen’s outlook.
Regional FX
Most Asian currencies posted modest declines against the US dollar, but the Indian rupee stood out as an outperformer, appreciating by 0.7% despite the dollar’s modest rebound. The move could be supported by Reserve Bank of India (RBI) intervention, which helped stabilize the currency.
In Taiwan, we expect the central bank to keep its policy rate unchanged at 2%. There is little urgency to adjust rates given favourable growth and inflation dynamics.
The Bank of Thailand cut its policy rate by 25bps to 1.25%, in line with Bloomberg consensus, in a unanimous decision. The central bank lowered its 2026 GDP growth forecast by 0.1ppt to 1.5% and expects growth to recover only to 2.3% in 2027, still below potential. Inflation is likely to remain subdued, supported by supply-side factors such as lower global energy prices and government subsidies aimed at easing cost-of-living pressures. While the Thai baht has shown resilience on the back of a weaker U.S. dollar and Thailand’s current account surplus, downside risks from a soft domestic growth outlook and election uncertainty ahead of the 8 February 2026 general election could cap further gains.
Bank Indonesia (BI) kept its policy rate unchanged at 4.75%, in line with market expectations, as part of its effort to safeguard rupiah stability. Despite the rate hold, BI reiterated its easing bias, signalling that it continues to assess room for further cuts while balancing currency stability and growth support. The rupiah faces headwinds from fiscal risks and narrow yield spreads versus the US.