Anticipation of more cues on U.S. rates also kept most regional units trading in a tight range, especially as comments from Federal Reserve officials continued to downplay expectations for early cuts.
The Chinese yuan moved little on Tuesday, with losses in the currency held back by a strong midpoint fix from the People’s Bank of China.
Sentiment towards China saw little improvement after Beijing set a 5% GDP target for 2024, the same as 2023. But with a lower fiscal deficit target for the year, investors questioned just how achievable the target seemed, now that the economy no longer had a lower base for comparison from the COVID-19 pandemic.
The Chinese government also promised more stimulus measures this year to shore up growth. But a lack of clarity on the proposed measures inspired little cheer.
Separately, a private survey showed growth in China’s services sector slowed in February, pointing to continued economic headwinds for the country.
Broader Asian currencies took negative cues from China, given the country’s economic prominence in the region.
The Australian dollar, which has high trade exposure to China, fell 0.1%, even as data showed an improvement in the country’s current account in the fourth quarter. The reading heralds a potential improvement in fourth quarter GDP data, which is due on Wednesday.
The Singapore dollar and South Korean won retreated, while the Indian rupee tread water.
The Japanese yen hovered near a four-month low, even as data showed that inflation in Tokyo rebounded as expected in February. Sticky inflation gives the Bank of Japan more impetus to raise interest rates from ultra-low levels.
The dollar index and dollar index futures steadied in Asian trade on Tuesday, after seeing some volatility in recent sessions.
While recent data showed some stickiness in U.S. inflation, traders appeared to have so far maintained their bets that the Fed will cut interest rates in June.
But this trade is expected to be largely tested this week, with a two-day testimony from Fed Chair Jerome Powell– where analysts expect him to largely maintain his hawkish tilt.
After that, key nonfarm payrolls data is due this Friday, and expected to offer more cues on the labor market.
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