Investing.com-- Most Asian currencies recovered mildly on Tuesday, while the dollar nursed losses after U.S. President Donald Trump postponed plans to impose trade tariffs against Canada and Mexico.
But gains in regional currencies were limited, given that Trump’s 10% tariffs against China are still set to take effect later in the day.
Chinese markets remained closed for the Lunar New Year holiday, although the yuan clocked wild swings in offshore trade.
Broader Asian currencies did recover a bulk of their losses from the previous session, tracking a decline in the dollar. But regional markets were still nursing losses in recent weeks, especially amid growing concerns over U.S. interest rates remaining high for longer.
The Japanese yen’s USD/JPY pair rose 0.3% to 155.15 yen after falling sharply in overnight trade.
The South Korean won’s USD/KRW pair was flat, while the Australian dollar’s AUD/USD pair fell 0.2%.
The Singapore dollar’s USD/SGD pair was flat, while The Indian rupee’s USD/INR pair remained in sight of a record high above the 87 rupee level.
Chinese yuan volatile ahead of Trump tariffs
The yuan’s USD/CNH offshore pair steadied on Tuesday after briefly surging to an over three-week high in the prior session. The currency fell sharply from this peak after Trump postponed plans to impose 25% import duties on Canada and Mexico.
But Trump is still set to impose 10% trade tariffs on China from 00:00 ET (05:00 GMT) on Tuesday.
The U.S. President is set to speak with Chinese President Xi Jinping as soon as this week, the White House said, potentially setting up a diplomatic deal that could avoid a greater trade war.
The yuan was battered by concerns over a Sino-U.S. trade war akin to that seen in Trump’s first term. While his postponement of tariffs against Canada and Mexico offered markets some relief, sentiment still remained uncertain over more measures from Trump.
Dollar dips on tariff relief, payrolls anticipation limits losses
The dollar index and dollar index futures rose 0.2% each in Asian trade, steadying from steep overnight losses.
But further declines in the dollar were stemmed by persistent concerns over high for longer U.S. interest rates, especially following strong PCE price index inflation data from last week.
The Federal Reserve has signaled that sticky inflation will give it less impetus to keep cutting interest rates, which bodes well for the dollar. Fed officials also flagged a reluctance to ease policy amid uncertainty over Trump’s policies.
Focus this week is on nonfarm payrolls data for January, due on Friday. The reading is likely to factor into expectations for interest rates.