Anna 
Most Asian currencies experienced slight gains on Tuesday, finding some relief as the U.S. dollar recorded mild declines ahead of a crucial inflation reading that is expected to provide insights into future U.S. interest rate movements. However, the overall gains across regional currencies were limited, with many currencies remaining within established trading ranges observed over the past two months. The U.S. dollar also remained close to a recent three-month high.
The Japanese yen stood out as one of the stronger performers for the day, posting a 0.2% rise from its weakest level in over three months. This movement came after Japan’s consumer price index (CPI) for January showed slightly higher-than-expected inflation. While still indicating a retreat in inflation, the data contributed to growing expectations that the Bank of Japan (BOJ) might raise interest rates as early as April. The BOJ is anticipated to phase out its yield curve control and negative interest rate policies this year, with persistent inflation potentially providing additional motivation for an earlier policy shift.
However, the challenging economic conditions in Japan, particularly the unexpected recession in the fourth quarter, could influence the timing of the BOJ’s plans. The yen’s performance reflected the market’s attention to the potential pivot in the BOJ’s monetary policy.
Across broader Asian currencies, gains were modest, and trading remained influenced by caution ahead of key economic readings. The Australian dollar rose 0.1% in anticipation of a monthly Consumer Price Index (CPI) reading scheduled for Wednesday. The New Zealand dollar, on the other hand, fell 0.2% as market participants awaited the Reserve Bank of New Zealand’s interest rate decision, where the central bank was expected to maintain rates and signal potential future hikes.
The Chinese yuan remained flat as investors awaited a series of key Purchasing Managers’ Index (PMI) readings scheduled for Friday, providing insights into the performance of Asia’s largest economy. Other currencies, including the South Korean won and Singapore dollar, saw slight gains, while the Indian rupee traded flat but above record-low levels. Overall, the movement in Asian currencies reflected a cautious stance ahead of significant economic indicators and developments in the U.S. that could impact global markets.
