Asia FX muted, dollar steady with CPI data, Fed in sight

Investing.com– Most Asian currencies kept to a tight range on Tuesday, while the dollar steadied after recent gains as traders hunkered down before key U.S. inflation data and a Federal Reserve meeting due in the coming weeks.

The and fell slightly in Asian trade. But the greenback held above 104 against a basket of currencies, as uncertainty over the Fed’s plans to cut interest rates in 2024 drove some flows into the dollar.

data is due later in the day, and is expected to show that inflation eased slightly in November. But traders remained wary of a stickier reading, especially after data released last week beat expectations.

While the Fed is widely expected to , markets grew more uncertain over when the bank could begin trimming rates in 2024. The strong payrolls data saw Fed Fund traders .

This spurred some strength in the dollar, and pressured Asian currencies.

The rose 0.4% on Tuesday, but was nursing steep losses from the prior session after media reports showed that the Bank of Japan had no intention of moving away from its ultra-loose policies in the near-term.

While the bank has still signaled some intent to eventually raise interest rates from negative levels, the reports suggested that such a move was likely to be later, rather than sooner.

Data on Tuesday showed a mild pick-up in Japanese in November.

Among other Asian currencies, the was flat as a series of strong midpoint fixes by the People’s Bank helped the currency weather data showing a in China.

But this led to a wider gulf between the onshore and . The offshore yuan traded around 7.1875, while the onshore yuan was at 7.1766 to the dollar.

Weak inflation data raised more concerns over a persistent economic slowdown in China, and also dented sentiment towards broader Asian markets. The rose 0.4% on Tuesday after retreating in the prior session on concerns over China.

Reserve Bank of Australia Governor Michele Bullock said the bank will maintain a cautious approach with monetary policy, after warning on potential inflation risks earlier this month.

The was flat after retreating in the prior session, while the and also tread water.

The hovered around record lows before key data from the country due later in the day. The reading comes on the heels of a warning from the Reserve Bank of India that inflation risks remained primed towards the upside, due to high food prices.

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