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Asian currencies and the U.S. dollar traded in narrow ranges on Tuesday as investors stayed cautious ahead of key U.S. inflation data that could influence expectations for the Federal Reserve’s interest-rate outlook. The Australian dollar remained relatively firm after the Reserve Bank of Australia (RBA) kept borrowing costs unchanged.
The U.S. Dollar Index was little changed at 99.81 after gaining around 0.3% in the previous session. Currency markets are now focused on upcoming U.S. consumer price index (CPI) figures for clearer signals on inflation and future Fed policy.
The RBA maintained its cash rate at 4.35%, as widely anticipated, extending its policy pause while assessing persistent price pressures and softer economic conditions. Australian inflation eased to 3.8% in June but remained above the central bank’s 2%-3% target range.
Recent underlying inflation figures came in below expectations, easing pressure on policymakers to raise rates immediately. However, the RBA indicated that additional tightening remains possible if inflation risks intensify. Following the decision, the AUD/USD pair was broadly unchanged.
The Japanese yen also stabilized, with USD/JPY trading around 159.23 after the yen strengthened sharply in the previous session. The currency has already surrendered a significant portion of gains generated by joint U.S.-Japan intervention after it previously weakened to a 40-year low of 163.99 per dollar. Investors remain alert to the possibility of further intervention.
Elsewhere in Asian forex markets, USD/KRW slipped about 0.2%, while the Singapore dollar was largely flat. China’s onshore and offshore yuan showed limited movement, while USD/INR edged approximately 0.1% higher.
Attention is now shifting toward Wednesday’s U.S. CPI report, followed by producer price and retail sales data. Weak July U.S. payroll figures have already pressured the dollar and encouraged traders to reduce some bullish positions.
Meanwhile, rising oil prices could create additional challenges for Asian currencies, particularly in energy-importing economies. Fading expectations for a U.S.-Iran agreement have supported crude prices, potentially adding to inflation concerns and complicating the outlook for global interest rates and currency markets.
