Most Asian currencies eked out minor gains on Tuesday as optimism from the Sino-US trade deal propped up investor sentiment in holiday-thinned trade.
With the "phase one" US-China trade deal expected to be signed very shortly and with China providing clarity on the goods it will lower tariffs on, investors have been enjoying a pleasant reprieve from trade tensions that have rattled financial markets for over a year.
Market players, however, are refraining from placing heavy bets ahead of the New Year to gauge how far the partial trade agreement would go in resolving the Sino-US conflict.
"Relative calm and reduced safe-haven demand reflect 'fat tail risks' ducked (for example, "Phase-1" US-China deal and "Brexit")," a Mizuho bank note said on Monday.
"Risks are merely deferred, maybe dormant, but certainly not dead."
The South Korean won and the Taiwan dollar strengthened the most among Asian units.
South Korean President Moon Jae-in said on Tuesday that South Korea, China, and Japan agreed to help promote North Korea-US dialogue to end North Korea's nuclear programme at the trilateral summit on China.
The Taiwan dollar strengthened about 0.2% supported by plans disclosed on Monday to sell T$150 billion ($4.97 billion) in government bonds in the first quarter.
In China, Premier Li Keqiang said on Monday the government will consider rolling out more measures to lower financing costs for the real economy, including broad-based and "targeted" cuts in the reserve requirement ratio (RRR), relending and rediscounting.
The Chinese yuan was in the black but was largely flat.
Meanwhile, the currency of net oil importer India was weighed down by higher oil prices.
Philippines onshore markets were closed for holiday, while the offshore peso stood unchanged after about two hours of trade. Indonesian currency markets were closed for a holiday and the rupiah will resume trade on Thursday.
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