Most Asian currencies moved little on Tuesday as markets hunkered down before a widely expected interest rate hike from the Federal Reserve this week, while the Australian dollar surged on an unexpected rate hike by the Reserve Bank<\/p>\n
The\u00a0Australian dollar<\/a><\/span>\u00a0jumped 1% after the Reserve Bank of Australia unexpectedly hiked its\u00a0cash target rate<\/a><\/span>\u00a0by 25 basis points, to 3.85%. The move ducked market expectations that the bank will hold rates steady after pausing its rate hike cycle in April.<\/p>\n The RBA cited stubborn inflation as the main motivator for the move, stating that inflation still remained \u201ctoo high.\u201d\u00a0Consumer price index inflation<\/a><\/span>\u00a0read at 7% in the first quarter of 2023, well above the RBA\u2019s target range of 2% to 3%.<\/p>\n The RBA also said that it will consider more rate hikes, although future action will be largely dependent on economic data.<\/p>\n Broader Asian currencies moved little, as focus turned to the conclusion of a two-day Federal Reserve meeting on Wednesday. Regional trading volumes were also muted on account of a Chinese market holiday.<\/p>\n The\u00a0Japanese yen<\/a><\/span>\u00a0fell 0.1% to a near two-month low, as it continued to reel from dovish signals offered by the Bank of Japan. The BOJ\u00a0held interest rates at record lows<\/a><\/span>\u00a0last week, and signaled that it had no intention of altering its ultra-loose policy in the coming months.<\/p>\n While Chinese markets were closed, weak economic signals from the country also weighed on most regional currencies. China\u2019s\u00a0manufacturing sector<\/a><\/span>\u00a0unexpectedly shrank in April, data showed over the weekend, while growth in the\u00a0services sector<\/a><\/span>\u00a0missed estimates.<\/p>\n The reading showed that a post-COVID rebound in the economy was running out of steam, which could herald continued weakness for China’s largest regional trading partners.<\/p>\n The\u00a0offshore yuan<\/a><\/span>\u00a0slid 0.4% on Monday, and was trading at a near two-month low. Chinese markets will resume trade from Thursday.<\/p>\n Broader markets were largely focused on Wednesday\u2019s Fed meeting, where the central bank is expected to\u00a0hike interest rates by 25 basis points<\/a><\/span>.<\/p>\n The\u00a0dollar index<\/a><\/span>\u00a0and\u00a0dollar index futures<\/a><\/span>\u00a0fell slightly on Tuesday after logging strong gains over the past two sessions.<\/p>\n