Asian currencies gave back some of the prior session's gains on Tuesday while the U.S. dollar retained overnight weakness, as market participants positioned ahead of a closely watched U.S. consumer price index reading for October.
The US Dollar Index was unchanged at 101.673 by 04:07 GMT, after a 0.6% decline in the previous session. That pullback in the dollar followed a recovery in risk-sensitive assets after U.S. President Donald Trump indicated further military action against Iran was unlikely and diplomatic efforts continued. In parallel, lower crude prices helped ease market concern about a renewed energy-driven inflation shock.
Still, traders were cautious ahead of the CPI release due later on Tuesday. A stronger-than-expected inflation reading could bolster expectations for additional monetary tightening and give renewed support to the dollar, particularly after robust U.S. employment data last week shifted market pricing toward higher rates. Markets are currently pricing in an 85% probability of a 25-basis-point Federal Reserve rate increase in December, reflecting that shift.
“For Asia FX, the combination of a softer dollar and lower oil remains broadly supportive, although equity-flow differentiation continues to matter,” MUFG analysts said in a note, underscoring that the interaction of currency moves, commodity prices and equity flows continues to shape regional FX outcomes.
Across Asian FX markets, moves were generally muted following Monday's stronger gains. The Japanese yen held near recent levels, with USD/JPY trading flat around 158 yen. The yen's relative stability has been aided by the prospect of further intervention by Japanese authorities, which continues to act as a restraining influence on a more pronounced yen decline. The pair had fallen 0.4% on Monday.
The South Korean won saw the dollar/won pair rise 0.3% on Tuesday after a notable 1.7% slide in the previous session, illustrating the ongoing choppiness in flows across the region.
China's latest trade figures showed solid external demand, with exports up 35.2% year on year in October and imports higher by 41.6%. Those figures pushed the country's trade surplus above $1 trillion for 2026. The Chinese yuan's onshore USD/CNY and offshore USD/CNH rates were largely muted in Asian trade, showing little net change.
Elsewhere in the region, the Australian dollar gained, with AUD/USD up 0.2%. The Singapore dollar and Indian rupee were largely unchanged against the dollar, with USD/SGD and USD/INR showing little net movement on the day.
Overall, markets remain sensitive to the interaction of U.S. inflation data, energy prices and geopolitical signals. Traders are watching whether the CPI print reinforces expectations of further Fed tightening or provides room for the dollar to extend its recent losses.