Investing.com — Most Asian currencies fell on Tuesday, while the dollar held steady as focus remained on when the Federal Reserve will start cutting interest rates.
The Japanese yen continued to underperform as the currency continued to reverse a large portion of its gains made on the back of government intervention last week.
Focus was also on the Reserve Bank of Australia meeting where the central bank is widely expected to keep interest rates steady and deliver a more hawkish outlook amid steady inflation.
The Japanese yen weakens after the intervention, and the US dollar rises against the Japanese yen
The Japanese yen continued to weaken on Tuesday, as the pair, a reversal of the yen's strength, rose 0.4% and crossed the 154 level.
The currency pair had risen to 160 pips in late April, before apparent instances of the government selling the dollar led to a sharp decline in the pair to the 152 pip level.
But the yen has struggled to retain any strength, since the main factor behind its decline – the wide gap between US and Japanese interest rates – has largely remained in place.
Markets are now looking to further readings on Japanese inflation and wage growth to gauge whether the Bank of Japan will raise interest rates further this year, which is expected to provide some relief to the Japanese currency.
The Australian dollar stabilized against the Reserve Bank of Australia after weak retail sales
The Australian dollar pair moved slightly on Tuesday after weak first-quarter data led traders to question how hawkish the Reserve Bank of Australia will be.
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Retail sales fell during the first quarter amid persistent inflation and rising interest rates, indicating continued weakness in consumer spending. This trend provides muted expectations for inflation.
The Reserve Bank of Australia is widely expected to do so later in the day, but is expected to provide some hawkish signals in the wake of a hotter-than-expected inflation reading for the first quarter.
Asia's forex market weakens as dollar stabilizes after recent losses
Broader Asian currencies fell slightly on Tuesday, with the single currency recovering some of last week's losses.
The focus this week is on several Federal Reserve officials' comments on the path of interest rates, especially after weaker-than-expected data led to traders once again starting to price in interest rate cuts by the central bank.
But this idea has provided little support for Asian currencies, because the Fed is still expected to start cutting interest rates only by September.
The Chinese yuan pair rose 0.2%, while the South Korean won pair rose about 0.3%.
The Singapore dollar pair rose 0.1%, while the Indian rupee pair rose marginally and was within sight of record highs set in late April.