Asian currencies strengthened amid a weakening dollar

On Tuesday, most Asian currencies strengthened slightly, receiving some support from the weakness of the dollar ahead of key inflation data expected this week. These data should provide additional signals regarding the further dynamics of the interest rate in the United States.

However, the growth of Asian currencies was limited, and most of them remained within the trading range established over the past two months. The dollar also remained close to its recent three-month high

The Japanese yen strengthened slightly (by 0.2%) from its lowest level in the last three months after consumer price inflation in Japan in January turned out to be slightly higher than forecasts. Although the data still indicate a decrease in inflation, they have raised expectations that the Bank of Japan may raise the interest rate as early as April.

The Bank of Japan is expected to stop regulating the yield curve and negative interest rate policy this year, and high inflation may provide an additional incentive for the central bank to do so earlier than planned.

However, the deterioration of economic conditions in Japan may delay the Bank of Japan's plans, especially after the country's economy unexpectedly entered recession in the fourth quarter.

Other Asian currencies strengthened slightly during the day as a number of regional economic indicators were expected. The Australian dollar rose slightly by 0.1% before the publication of monthly CPI inflation data, which is due on Wednesday.

The New Zealand dollar fell slightly by 0.2% before the Reserve Bank meeting, expecting the bank to maintain the interest rate and note possible increases against the background of high inflation.

The Chinese yuan remained stable ahead of the release of key business activity index (PMI) data, which is expected this Friday and should give an idea of the largest Asian economy.

The South Korean won and the Singapore dollar strengthened slightly, while the Indian rupee remained unchanged, but traded well above the record low.

The dollar index and dollar futures declined 0.1% during Asian trading on Tuesday, and the dollar lost some ground ahead of expected key economic data.

Data on the Producer price Index (PCE), which is the Fed's preferred measure of inflation, will be released on Thursday and is expected to affect the US central bank's interest rate plans.

Before that, the second estimate of U.S. GDP for the fourth quarter is expected to be released on Wednesday. The relative stability of the American economy and inflation makes the Federal Reserve System make it clear that it is in no hurry to start lowering interest rates earlier this year, which is favorable for the dollar, but unfavorable for Asian currencies.