Most Asian currencies rose on Tuesday, reversing some recent losses as the dollar retreated from 2023 peaks ahead of a slew of key economic indicators due this week, although risk appetite remained weak.
Purchasing managers' indexes (PMIs) from Japan and Australia also limited any major gains in regional currencies, as data showed business activity in some of Asia's largest economies was struggling to revive.
The Japanese yen rose 0.1% after briefly falling as low as 150 to the dollar earlier this week. Traders believe a breach of that level would attract government intervention in the currency market.
The Bank of Japan’s intervention in bond markets to curb overheating yields – also weighed on the yen this past week.
The Australian dollar rose 0.3%, recovering from a near 11-month low following some optimism about China.
China's Yuan Rises on US-China Optimism
The Chinese yuan rose 0.2%, mainly supported by news of a meeting between US and Chinese officials to discuss domestic and global macroeconomic issues.
The virtual meeting marked some improvement in relations between the world's largest economies, which have been at historic lows amid disagreements over semiconductors, Taiwan and allegations of espionage and human rights abuses.
The meeting also raised some hopes that the ongoing trade war between the two countries will not escalate further, even as China recently blocked exports of key battery-making materials in retaliation for US restrictions on chip exports to the country.
But sentiment toward China remains weak, especially amid concerns about a debt crisis in the country’s huge property market. These concerns have hit the yuan hard in recent weeks, sending it to near one-year lows.
Among other Asian currencies, the South Korean won and Singapore dollar each gained 0.1%, while the Indian rupee gained 0.1% in holiday trading.
The Thai baht was among the day's best performing currencies, gaining 0.5% on data showing a significant improvement in the country's trade balance.
Dollar Weakens as Yields Fall, Economic Data in Focus
The dollar index and dollar index futures both fell 0.1% in Asian trade, extending overnight losses after a recent rally in Treasury yields appeared to run out of steam.
Ten-year yields fell from 16-year highs on Monday, although they remained near 5%.
This week's focus is largely on a string of US economic data, starting with PMI data due later on Tuesday, followed by gross domestic product data due on Thursday.
Then on Friday, PCE inflation data—the Federal Reserve's preferred inflation measure—will round out the week. Markets will be watching for any signs of continued resilience in the U.S. economy, which would give the Fed more room to keep interest rates higher.
Federal Reserve Chairman Jerome Powell will speak on Wednesday, likely to offer more hints on monetary policy ahead of next week's Fed meeting.
However, the prospect of higher interest rates is not a good sign for Asian markets, as they narrow the gap between risky and low-risk yields.
Source: Investing.com
