Markets were also holding out for more economic signals from China, as recent data showed some respite from inflation and loan activity through August
Most Asian currencies moved little on Tuesday, while the dollar steadied near a six-month high as investors hunkered down before data showing a potential increase in U.S. inflation.
Markets were also holding out for more economic signals from China, as recent data showed some respite from inflation and loan activity through August. But the overall outlook for the Chinese economy still worsened, with a Reuters poll now predicting 2023 GDP growth of 5 per cent- in line with China’s official forecast, but lower than forecasts from investment banks.
The yuan stayed strong through this, with the Chinese currency bouncing back from a near 10-month low this week as the People’s Bank rolled out a number of strong daily midpoints. The bank was also seen intervening in currency markets to support the yuan.
Uncertainty over China kept the Australian dollar trading in a tight range on Tuesday, while a private survey also showed that Australian consumer sentiment worsened further in early-September.
Other China-exposed currencies moved little, with the South Korean won and Taiwan dollar both trading below 0.1 per cent in either direction.
The Indian rupee declined marginally after bouncing back from near record lows on Monday. Markets were also awaiting consumer inflation readings from the country, which are expected to show continued resilience in prices through August.
The Japanese yen stabilised on Tuesday after bouncing steeply from a near 10-month low overnight. The currency was strengthened chiefly by comments from Bank of Japan Governor Kazuo Ueda, who said that an end to the BOJ’s negative interest rates could be near.
Ueda said that the Bank of Japan’s 2 per cent inflation target was within sight, which would give the bank more momentum to begin increasing rates after around a decade of ultra-loose monetary policy.
But while such a scenario bodes well for the yen, the currency was still nursing sharp losses for the year, hit chiefly by an increasing gap between local and international interest rates.
Aggravating risk sentiment and fears of a BOJ pivot also reduced the yen’s appeal for carry trade this year.
