Most Asian currencies kept to a tight range on Tuesday as a resurgence in oil prices, on continued hostilities in the U.S.-Israel war on Iran, kept risk appetite largely on edge.
The Australian dollar reversed early gains to trade flat after the Reserve Bank of Australia raised interest rates as expected, but in a less unanimous decision than expected.
Beyond the RBA, focus this week is on a host of major central bank meetings, with the Federal Reserve set to decide on rates on Wednesday.
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The dollar index and dollar index futures rose slightly in Asian trade after falling from near 10-month highs in the prior session.
Australian dollar falls after contested RBA rate hike The Australian dollar’s AUD/USD pair reversed early gains to trade 0.1% higher after the RBA’s decision. The central bank raised interest rates by an as-expected 25 basis points to 4.10%.
But the decision was down to the wire, with four of the RBA’s nine-member rate-setting board voting for a hold.
Speaking after the meeting, RBA Governor Michele Bullock said that all members of the board supported a rate hike, and the only question was that over the timing of the move. Traders noted that Bullock’s comments were hawkish.
Bullock also did not commit to any future rate hikes or holds.
Tuesday’s hike was largely priced in following a series of hawkish messages from the RBA in recent weeks, as the central bank grapples with a late-2025 resurgence in inflation.
The central bank also warned of inflationary risks from the Iran conflict.
Yen recovers from 19-mth low amid intervention talk The Japanese yen’s USD/JPY pair rose 0.2%, but traded well below a near 19-month high hit last week.
Finance Minister Satsuki Katayama said last week that Tokyo was prepared to act quickly against wild swings in foreign exchange markets, keeping traders on edge over intervention.
The Bank of Japan is also set to meet this week, and is widely expected to leave rates unchanged while offering a hawkish outlook on policy.
BOJ Governor Kazuo Ueda said on Tuesday that underlying inflation was accelerating towards the BOJ’s 2% annual target-- a scenario that could prompt more rate hikes by the central bank.
Asia FX dithers amid little relief from Iran war Broader Asian currencies kept to a tight range on Tuesday, amid little relief from risk aversion prompted by the Iran war.
The Chinese yuan’s USD/CNY pair fell 0.2%, faring better than its peers on a stronger midpoint fix from the People’s Bank.
The Singapore dollar’s USD/SGD pair rose 0.1% after data showed the country’s key non-oil exports grew less than expected in February.
