Anna 
Most Asian currencies maintained a narrow range on Tuesday, with the dollar steadying after recent gains as traders adopted a cautious stance before crucial U.S. inflation data and the upcoming Federal Reserve meeting.
In Asian trade, both the dollar index and dollar index futures experienced slight declines. However, the greenback remained above 104 against a basket of currencies, driven by uncertainty surrounding the Fed’s potential interest rate cuts in 2024, attracting some flows into the dollar.
Later in the day, consumer price index data is expected to reveal a slight easing of inflation in November. However, traders remained cautious, especially after last week’s nonfarm payrolls data exceeded expectations, raising concerns about a stickier inflation reading.
While the Fed is anticipated to keep rates steady on Wednesday, market uncertainty increased regarding the timing of potential rate cuts in 2024. The robust payrolls data prompted Fed Fund traders to scale back bets on a March 2024 rate cut, bolstering the dollar and exerting pressure on Asian currencies.
On Tuesday, the Japanese yen rose 0.4%, recovering from prior losses incurred after reports indicated that the Bank of Japan had no immediate plans to deviate from its ultra-loose policies. Although the bank has signaled an eventual interest rate hike from negative levels, reports suggested that such a move would likely occur later than sooner.
Japanese producer price inflation saw a mild uptick in November, according to Tuesday’s data.
Among other Asian currencies, the Chinese yuan remained flat, benefitting from strong midpoint fixes by the People’s Bank despite data indicating a sustained disinflationary trend in China. However, this contributed to a widening gap between onshore and offshore yuan, with the offshore yuan trading around 7.1875, while the onshore yuan stood at 7.1766 against the dollar.
Weak inflation data heightened concerns about a prolonged economic slowdown in China, impacting sentiment across broader Asian markets. The Australian dollar rose 0.4% on Tuesday after retreating in the prior session due to concerns over China.
Reserve Bank of Australia Governor Michele Bullock reiterated the bank’s cautious approach to monetary policy, addressing earlier warnings about potential inflation risks.
The South Korean won remained flat, the Singapore dollar and Malaysian ringgit treaded water, and the Indian rupee hovered near record lows ahead of key CPI inflation data. The Reserve Bank of India had recently warned of inflation risks, primarily driven by high food prices.
