Anna 
Most Asian currencies experienced a decline on Tuesday, following a series of moderate economic reports from the region. The Australian dollar faced significant losses after the Reserve Bank opted to keep interest rates steady at 4.35%, offering minimal guidance on monetary policy. Governor Michele Bullock emphasized the need for additional economic cues before considering policy changes, while cautioning about persistent inflation risks.
The Australian dollar, the day’s worst performer, dropped by 0.6%. Weak economic indicators, including an unexpected current account deficit and lower-than-expected export contributions, further weighed on the currency. These readings cast a shadow on Australia’s third-quarter GDP data scheduled for Wednesday.
The Japanese yen, after recent gains, stabilized above 147, prompted by disappointing inflation data in Japan’s capital and subdued growth in the services sector. These factors diminish the urgency for the Bank of Japan to tighten its ultra-loose policy.
China’s yuan remained flat despite positive growth in the country’s services sector. However, new downside risks emerged as reports of a spike in respiratory illnesses raised concerns about another epidemic. Additionally, Chinese state banks engaging in dollar swaps to support the yuan added to uncertainties.
South Korea’s won declined by 0.2% as consumer inflation fell below expectations in November, and third-quarter GDP remained subdued. The Indian rupee traded sideways near record lows ahead of the Reserve Bank of India meeting, where rates are expected to remain unchanged amid a persistent decline in Indian inflation.
A broader trend of Asian currencies weakening was driven by a rebound in the dollar, recovering some lost ground in anticipation of key nonfarm payrolls data later in the week. The dollar index and futures were flat in Asian trade after a 0.6% overnight jump. While Asian markets showed robust performance in November, the dollar sustained losses, creating uncertainty about the Federal Reserve’s policy direction. Traders now perceive a nearly 50% chance of a 25-basis-point rate cut in March 2024, highlighting evolving expectations regarding the timing of policy adjustments.
