Asian Currencies Show Modest Gains as Investors Await Key Inflation Data

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Most Asian currencies saw slight gains on Tuesday, while the dollar was mixed ahead of more cues on the U.S. economy and monetary policy from key inflation data due later in the week. However, the gains in regional currencies were limited following a string of less hawkish cues from local central banks, amid signs that inflation was peaking across a bulk of the region.

Data from China showed that consumer price index inflation in the country missed expectations in March, while producer price index inflation continued to fall. This points to a mixed economic rebound in the country, especially as its manufacturing sector struggles with slowing demand. The reading also limits the potential for interest rate hikes by the People’s Bank of China, which is expected to dent the yuan’s appeal.

The Australian dollar was among the best performers for the day, jumping 0.4% after data indicated an improvement in local consumer sentiment, following the Reserve Bank's pause in its rate hike cycle earlier this month. The South Korean won also rose 0.2%, even as the Bank of Korea kept interest rates steady for a second consecutive meeting. On the other hand, the Indian rupee fell 0.1%, extending losses after the Reserve Bank of India unexpectedly held interest rates steady last week and signaled an extended pause in its rate hike cycle.

This week's focus is squarely on inflation data for March, as well as the minutes of the Fed’s March meeting, both of which are expected to provide more cues on the path of interest rates. The Japanese yen rose 0.2% as improving sentiment dented the currency’s safe-haven appeal, while a dovish near-term outlook for Japanese monetary policy kept appetite for the yen limited. The Philippine peso rose 0.2% as data showed that the country’s industrial production blazed past expectations in February, but the country also logged an unexpected trade deficit during the month.

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