SINGAPORE- The dollar edged broadly lower on Tuesday but traded in a narrow range, as investors remained cautious ahead of key US inflation data due later in the day just as the Federal Reserve kicks off its two-day monetary policy meeting.
In Asia, China’s yuan fell to a six-month low after the central bank lowered a short-term lending rate for the first time in 10 months, in a bid to restore market confidence and prop up its stalling post-pandemic recovery.
The onshore yuan bottomed at 7.1680 per dollar, its lowest since last November, and last traded at 7.1618.
Its offshore counterpart was last 0.2 percent lower at 7.1709 per dollar, having weakened to a fresh six-month low of 7.1782 earlier in the session.
“China’s slowdown is partly due to policymakers’ intention to push ahead with structural reforms,” said analysts at ANZ in a note.
“Monetary easing is merely a tentative measure to engineer a soft landing for the traditional economy.”
Market attention now turns to the US Labor Department’s CPI report due later on Tuesday, which is expected to show inflation cooled slightly in May and could give the Fed room to pause its aggressive rate-hike cycle when it announces its interest rate decision on Wednesday.
Markets are currently pricing in a nearly 84 percent chance that the Fed will keep rates on hold at this week’s meeting, according to the CME FedWatch tool.
Those expectations kept risk sentiment buoyant, pinning the US dollar near multi-week lows against the risk-sensitive Australia and New Zealand dollars.
The Aussie rose 0.23 percent to $0.6766, after hitting a one-month top of $0.6774 in the previous session.
