Asia FX inches up on China policy move, Australian dollar falls as RBA holds rates By Investing.com

Investing.com– Most Asian currencies edged higher on Tuesday as investors cheered signs of more stimulus measures from China, while the Australian dollar fell sharply after the country's central bank to keep rates steady and strike a less hawkish chord.

Gains in regional currencies were limited as investors were cautious ahead of a key US inflation reading, which could provide more clues on the Federal Reserve's rate outlook before it meets next week.

Australian dollar slips after RBA decision

The Australian dollar pair fell 0.7%, and was nearing a four-month low after the Reserve Bank of Australia held steady at 4.35% in its December policy meeting, citing sticky inflation and a tight labor market.

The central bank said that some upside risks to inflation had subsided, and that it was gaining confidence that inflation was moving towards its target range. But it still expects inflation to fall only within its 2% to 3% target range by 2026.

The RBA's views were seen as somewhat less hawkish, especially as recent gross domestic product data showed that growth slowed in the September quarter.

ANZ analysts called Tuesday's decision a “dovish step,” and reiterated their call for the RBA to start cutting interest rates by May 2025.

Chinese yuan inches up on stimulus boost

The Chinese yuan offshore pair fell 0.2% on Tuesday, while the onshore pair rose 0.1%.

China has pledged to implement more proactive fiscal stimulus measures and adopt easier central monetary policies in 2025, the government said at a Politburo meeting on Monday.

Other regional currencies captured some bids on hopes for improved economic activity in China. The focus was now on China's Central Economic Work Conference, which is expected to start on Wednesday and is likely to offer more hints on planned stimulus measures.

But trade data from China sank. While the country rose in November, both were and read weaker than expected.

The Singapore dollar pair fell 0.2%, while the Philippine peso pair was largely unchanged.

The South Korean pair edged lower after rising as much as 1% in the previous session. A number of government measures aimed at stabilizing local markets helped ease some concerns about the ongoing political crisis in the country, which had affected the gains in recent sessions.

The Thai baht pair fell 0.3%, while the Indian rupee pair was largely silent.