Regional currencies saw some relief as the U.S. dollar stabilised after soaring to near three-month highs this week

Most Asian currencies gained slightly on Tuesday, recovering marginally after growing expectations of higher-for-longer U.S. interest rates pushed up the dollar and weighed on regional markets.

Regional currencies saw some relief as the U.S. dollar stabilised after soaring to near three-month highs this week. The dollar was buoyed chiefly by a series of hotter-than-expected U.S. economic data, as well as comments from Federal Reserve Chair Jerome Powell, who said that rates will remain steady in the time being.

The Australian dollar was the best performer among its Asian peers, gaining 0.6% from a more than 1-½ month low after the Reserve Bank of Australia kept interest rates steady, and warned of more rate hikes if inflation remained sticky.

The RBA’s warning caught some traders off-guard, especially as recent declines in Australian inflation spurred bets that the RBA could signal interest rate reductions this year. But the bank gave no such indication on Tuesday.

Other data pointed to more cooling in the Australian economy. While retail sales grew 0.3% quarter-on-quarter in the December quarter, they still dropped 1% from last year.

Wider Asian currencies rose marginally. The Japanese yen gained 0.1% after dipping to a more than one-month low, while the Singapore dollar added 0.1%.

The Chinese yuan was flat, but was once again close to breaking below the 7.2 mark against the dollar- its lowest in 1-½ months. A string of weak PMI readings over the past week dented the currency, and also set a dour tone for upcoming inflation data for January.

The inflation data is also due before the week-long Lunar New Year holiday, which begins this Friday.

The Indian rupee treaded water near the 83 level, with focus turning to a RBI meeting this Thursday. The Reserve Bank of India is expected to keep rates steady, while its forecasts for inflation and economic growth will be closely watched.

The rupee had now largely reversed a mild boost from the Indian government unveiling a comparatively conservative budget for the coming financial year, which was intended to help ease India’s massive fiscal deficit.

The South Korean won added 0.5%, but stayed in sight of a nearly two-month low.