Forex - Australian dollar stronger ahead of cash rate decision

Investing.com - The Australian dollar was well bid on Tuesday in Asia ahead of the latest cash review, while the Japnese yen edged slightly weaker ahead of the first quarter Tankan survey.

AUD/USD traded at 0.9273, up 0.10%, while USD/JPY traded at 103.24, up 0.01%.

To start a new month and quarter, the Reserve Bank of Australia's latest cash rate decision is due at 1430 Sydney (0330 GMT), with expectations of another decision to hold steady.

AI Group announces its March at 0930 (2230 GMT). The index edged slightly higher in February to 48.6.

The Bank of Japan's first quarter Tankan business survey at 0850 Tokyo time (2350 GMT) is expected to show sentiment among major manufacturers improved for the fifth straight quarter in March.

In China the CFLP manufacturing PMI is due at at 0900 local time (0100 GMT) followed by the March HSBC final manufacturing PMI at 0945 (0145 GMT).

The CFLP is expected to come in at 50.3 and the HSBC figure at 48.1.

Separately, the Reserve Bank of India has its latest policy decision at 1100 Mumbai time (0530 GMT), with expectations for no change.

Overnight, the dollar edged lower against most major currencies after Federal Reserve Chairwoman Janet Yellen said the U.S. economy still requires monetary support due to a sagging labor market, while soft factory data out of the Chicago area weakened the greenback as well.

In her first major speech as Fed Chair, Yellen told the National Interagency Community Reinvestment Conference in Chicago, Illinois, that the U.S. economy still needs monetary support to ensure more sustained recovery.

"I believe it is appropriate for the Federal Reserve to continue to provide substantial help to the labor market, without adding to the risks of inflation, is because of the evidence I see that there remains considerable slack in the economy and the labor market," Yellen said in prepared remarks of her speech.

The Fed is currently purchasing $55 billion in bonds a month to spur recovery, a monetary policy tool known as quantitative easing that suppresses interest rates to prop up the economy, weakening the dollar as a side effect.

Yellen's words sent investors reevaluating the pace at which the U.S. central bank will taper its bond-buying program let alone begin hiking benchmark interest rates.

"I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed," Yellen said

Elsewhere, data revealed that manufacturing activity in the Chicago region expanded at a slower rate than forecast in March, as new orders fell.

The Chicago purchasing managers’ index fell 55.9 from 59.8 in February. Analysts had expected the index to tick down to 59.0.

Meanwhile in Europe, the euro zone's consumer price index slowed to 0.5% this month from 0.7% in February, undershooting expectations for a reading of 0.6%. The European Central Bank targets an inflation rate of just under 2%, and March's figure was the lowest since November of 2009.

The report showed that core inflation rose 0.8% in March, in line with forecasts, but down from 1.0% in February.

The U.S. Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.02% at 80.28.

On Tuesday in the U.S., the Institute of Supply Management is to publish a report on U.S. manufacturing growth.