Asian currencies firmed amid some improvement in risk appetite

Most Asian currencies firmed on Monday as focus turned to upcoming meetings at the Bank of Japan.

A host of major economic numbers are also due in the coming days, offering markets more insight into the impact of the Iran war.

The yen’s USD/JPY pair dropped slightly on Monday, remaining below the closely watched 160 yen level.

The BOJ is widely expected to leave interest rates unchanged at 0.75% on Tuesday, although some analysts said a 25 basis point hike was still possible.

The central bank is likely to offer a hawkish outlook on policy, especially in the face of sticky inflation and price pressures stemming from the Iran war.

But a hold and a less hawkish stance than markets are expecting could weigh on the yen. The currency was nursing deep losses in March and dithered in April as markets questioned if the BOJ had enough headroom to raise rates further.

Broader Asian currencies firmed amid some improvement in risk appetite.

The Australian dollar’s AUD/USD pair gained 0.3%, reflecting some improvement in risk appetite.

Markets were also positioning for a strong first-quarter consumer price index inflation reading, due later in the week. The print is likely to further expectations for more interest rate hikes by the Reserve Bank of Australia.

The yuan’s USD/CNY pair declined 0.1%, with the currency remaining close to its strongest level in three years.

Chinese purchasing managers index data for April is due this week, and is set to offer more cues on business activity in the world’s second-largest economy. Figures for March showed some pick-up in activity, with focus on whether this momentum can be maintained.

Among other Asian units, the won’s USD/KRW pair shed 0.4%, while the Singapore dollar’s USD/SGD pair slipped 0.1%.