Asia FX weakens, dollar rises as markets await more Fed, rate-cut cues

investing.com:

Investing.com-- Most Asian currencies retreated on Tuesday, while the dollar advanced as traders remained largely risk-averse before more cues on when the Federal Reserve could begin cutting interest rates.

Anticipation of key economic readings from China also kept regional markets on edge, while fears of an escalation in the Middle East conflict kept risk appetite dull.

The Japanese yen fell 0.2% and crossed the 146 level to the dollar. Data on Tuesday that showed producer price index inflation remained soft in December, coming just a few days before consumer price index data, which is also expected to show inflation remaining languid.

Softer inflation gives the Bank of Japan less impetus to begin tightening its ultra-dovish policy, which bodes poorly for the yen.

Broader Asian currencies also retreated. The Australian dollar — a key indicator of regional risk appetite- fell 0.5% tracking weakness in commodity prices. Data also showed that Australian consumer sentiment worsened in early-January, amid concerns over high interest rates and inflation.

The South Korean won slid 0.7% as data showed a sustained reduction in export and import prices. The Indian rupee lost 0.1% after data on Monday showed wholesale price index inflation grew less than expected in December.

The Taiwan dollar slid 0.6%, amid increased volatility after the incumbent Democratic Progressive Party secured a third consecutive term in the recent Presidential elections. But the move is expected to invite more ire from China.

The dollar index and dollar index futures rose 0.5% and 0.3%, respectively, in Asian trade on Tuesday. The dollar index was also trading at a small premium to futures, indicating increased near-term demand for the greenback.

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