Investing.com-- Most Asian currencies firmed slightly on Monday, recouping a measure of recent losses as the dollar retreated before a March 4 deadline for U.S. President Donald Trump to impose more trade tariffs.
Sentiment towards Asian markets was aided by stronger-than-expected purchasing managers index readings from China and Japan, although this translated into limited currency moves.
Most Asian currencies were nursing losses from last week, as the dollar firmed on the prospect of more trade tariffs. PCE price index data also showed U.S. inflation remained sticky, even as earlier readings showed a deterioration in consumer sentiment.
Markets were also bracing for more trade tariffs against China.
Among Asian currencies, the Japanese yen’s USDJPY pair fell 0.3% after a stronger-than-expected manufacturing PMI print, although the reading still remained in contraction.
The Australian dollar’s AUD/USD pair was flat after mixed inflation, company profits, and jobs data for the fourth quarter.
Dollar retreats with Trump tariffs in focus
The dollar index and dollar index futures both fell around 0.4% each, reversing course after strong gains on Friday.
The greenback benefited from Trump’s threats of more tariffs, with Commerce Secretary Howard Lutnick stating that tariffs against Mexico and Canada will take effect from Tuesday. But Trump is yet to decide on whether he will stick with the planned 25% level.
An additional 10% levy on China is also set to take effect this week, after Trump imposed a similar duty in early-February.
Trump’s tariff agenda has boosted the dollar and kept markets on edge over their potential impact. Given that the tariffs will be borne by U.S. importers, analysts expect an uptick in inflation due to increased tariffs.
PCE price index data- the Federal Reserve’s preferred inflation gauge- showed last week that inflation remained above the Fed’s 2% annual target in January, giving the bank little cause to cut interest rates.
Nonfarm payrolls data for February is due later this week and is set to offer more cues on rates.
China PMIs positive, but yuan unchanged
Chinese manufacturing and non-manufacturing activity grew more than expected in February, government and private PMI data showed.
The prints showed some resilience in the Chinese economy, especially after a string of stimulus measures through late-2024.
But investors were waiting to gauge the impact of higher trade tariffs on China, with Trump having done little to soften his rhetoric against Beijing.
This notion offset any positive momentum in the yuan, with the USD/CNY pair rising 0.1% on Monday.
Among other Asian currencies, the Singapore dollar’s USD/SGD pair was flat, as was the Indian rupee’s USD/INR pair.