Asian Currencies Hold Steady Ahead of U.S. Tax Vote; AUD Slips on RBA Rate Cut Expectations

Asian currencies were mostly flat on Tuesday as investors awaited a key U.S. vote on President Donald Trump’s proposed tax cuts and the Reserve Bank of Australia's (RBA) interest rate decision. The U.S. Dollar Index remained stable after recent losses, while the Australian dollar dipped 0.2% against the U.S. dollar on rate cut bets.

The Australian central bank is widely expected to cut rates by 25 basis points amid slowing inflation and economic headwinds from U.S. tariffs. Analysts at Westpac said a return of trimmed mean inflation to the RBA’s 2-3% target band for the first time in over three years supports a rate cut, though cautious language is likely.

Meanwhile, the Chinese yuan saw little movement after the People’s Bank of China (PBOC) lowered its benchmark loan prime rate. The one-year LPR was cut by 10 basis points to 3.0%, and the five-year rate—used to price mortgages—was trimmed to 3.5% from 3.6%. The move aims to support China’s economy amid persistent trade tensions with the U.S.

Concerns over U.S.-China trade relations resurfaced after China’s Ministry of Commerce accused the U.S. of undermining recent talks, following a Commerce Department advisory against Huawei chips.

Moody’s recent downgrade of the U.S. credit rating due to the nation’s $36 trillion debt also weighed on sentiment, as investors eyed the impact of potential tax cuts on the country’s growing fiscal deficit.

Among other currencies, the Japanese yen, Singapore dollar, and Chinese yuan remained largely unchanged. The Indian rupee edged up 0.1%, while the South Korean won bucked the trend, rising 0.5% against the dollar.