Asia FX muted, dollar retreats with Israel-Hamas war in focus

investing.com:

Investing.com-- Most Asian currencies fell slightly on Monday,  while the dollar retreated from recent peaks as investors continued to fret over any potential spillover from the Israel-Hamas war. 

Appetite for risk-driven Asian currencies remained fragile, while the dollar saw a smidge of profit taking after coming close to 10-month highs last week. Fears of higher U.S. interest rates, following a strong inflation reading for September, kept sentiment towards Asian markets largely negative.

Focus this week is also on a string of key economic indicators from China and Japan. The Chinese yuan fell 0.1%, with third-quarter gross domestic product data due later in the week. 

The reading is expected to show continued weakness in Chinese economic growth, as business activity remained subdued despite the lifting of anti-COVID measures at the beginning of the year. 

The People’s Bank of China is also set to decide on its key loan prime rates this week, although a change appears unlikely after the PBOC kept medium-term lending rates unchanged. 

The Japanese yen firmed slightly and remained just shy of the 150 level, which investors believe will attract intervention by the Japanese government in currency markets. Focus this week is on Japanese industrial production, and more importantly, consumer inflation data for September. 

Any stickiness in inflation gives the Bank of Japan more impetus to tighten monetary policy- a scenario that could support the yen.

Recent weakness in oil prices helped the Indian rupee rise 0.1%, while markets also awaited wholesale inflation data due later in the day. 

The Australian dollar rose 0.4%, recovering from a 10-month low, although sentiment towards the currency remained dampened by weakness in