Most emerging Asian currencies declined on Tuesday, as the dollar firmed on hopes for fresh stimulus from global policymakers while the yuan, a bellwether for regional peers, weakened.
Investors widely expect the U.S. Federal Reserve to cut rates again in September. The market's focus will be Fed Chair Jerome Powell's remarks at the annual symposium of global central bankers starting on Friday at Jackson Hole, Wyoming.
The Chinese yuan declined as much as 0.3%, touching a one-week low, before paring some of the loss.
China's launch on Tuesday of a new lending reference rate, which saw a small initial cut, did not have a substantial impact on the yuan. But the change pointed to more easing ahead to seek to lower corporate borrowing costs.
OCBC said in a note that for Asian currencies, recovery of risk sentiment was offset by a weaker yuan in the wake of regulatory changes at China's central bank.
"With these divergent pressures, expect the Asian currencies to potentially drift in different directions for now, although the overall bias beyond the immediate horizon may still be for a higher USD-Asia," OCBC said.
At 0558 GMT, the Indian rupee and Indonesian rupiah were both down 0.2%, making them among top decliners in the region.
On Monday, India said it would exempt shadow lenders from debenture reserve requirements in an effort to increase the availability of money for lending.
A Reuters poll on Tuesday showed that 17 of 19 economists expect Indonesia's central bank to keep its key rate on hold on Thursday.
KOREAN WON ON FIRMER FOOTING
South Korea's won bucked the regional trend, gaining 0.2% on signs of some easing in Seoul's spat with Japan.
Japan has approved shipments of a high-tech material to South Korea for the second time since imposing export curbs last month, two sources said.
This came ahead of talks by government officials this week to resolve a dispute stemming from their wartime past.
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