Investing.com -- Most Asian currencies rose slightly on Tuesday as markets awaited more cues on U.S. monetary policy this week, while the Australian dollar fell after the Reserve Bank held rates steady, ducking some expectations for a hike.

Most regional currencies staged a mild recovery from recent lows this week, after a softer-than-expected reading on the Federal Reserve’s key inflation gauge saw markets question how much further interest rates will rise.

Weakness in U.S. manufacturing activity also raised questions over how much economic headroom the Fed has to keep raising interest rates.

But gains in Asian currencies were limited amid expectations that the Fed will still hike in July, while several more cues on U.S. monetary policy were also due this week.

The dollar moved little in Asian trade, with a U.S. market holiday also offering few cues. The dollar index and dollar index futures both moved less than 0.1% each on Tuesday.

Focus this week is on the minutes of the Fed’s June meeting, due on Wednesday, as well as key nonfarm payrolls data, due Friday.

The Chinese yuan added 0.1%, recovering slightly from near seven-month lows hit recently, while the Indian rupee hovered near a four-month high.

Australian dollar slips as RBA holds rates steady

The Australian dollar fell 0.3% after the RBA held interest rates steady on Tuesday, ducking expectations from a slim majority of analysts that the bank would hike rates for a third straight month.

But losses in the Australian currency were limited, as the RBA still raised the possibility of more rate hikes in the near future. The decision to pause in July was largely driven by a need to assess the impact of sharp monetary policy tightening on the economy.

The move comes as headline Australian inflation declined through May. But core inflation still remained elevated, giving the bank more impetus to potentially keep raising interest rates further.

Japanese yen flat amid intervention speculation

The Japanese yen moved little on Tuesday, hovering just around seven-month lows as markets continued to watch for any potential intervention by the government in currency markets.

Recent, sharp declines in the yen saw Japanese ministers offer up more verbal warnings on potential intervention. The country’s top currency diplomat, Masato Kanda, said that authorities were in close contact with U.S. officials over currency markets.

The yen was close to breaking above the 145 level against the dollar, which analysts say will attract some intervention by the government.

The government had last intervened in currency markets in October 2022, when the yen had hit an over-30-year low of 150 to the dollar.