Forex - Yen gains in early Asia, Aussie up ahead of central bank review

Investing.com - The yen clawed back against the dollar in early Asia on Tuesday with the Australian dollar also up ahead of the latest central bank review on interest rates.

USD/JPY traded at 113.75, down 0.21%, after recent sharp falls related to a further easing of monetary policy and AUD/USD traded at 0.8694, up 0.16%. EUR/USD held at 1.2491, up 0.06%.

Australia releases September trade and retail sales data at 1130 Sydney time (0030 GMT). Retail sales are expected to show a 0.4% month-on-month rise, faster than a 0.1% increase in August. Trade data for September is expected to show a wider deficit of A$1.950 billion compared with a deficit of A$0.8 billion in August.

Then comes the Reserve Bank of Australia's cash rate decision at 1430 (0330 GMT), where the unanimous view is for the rate to be kept unchanged at 2.5% for the fourteenth straight meeting.

Markets in Tokyo re-opened Tuesday.

Overnight, the dollar strengthened against most major currencies after a widely-watched U.S. factory barometer beat expectations, while a Bank of Japan Friday decision to beef up its stimulus programs bolstered the greenback further.

The Institute of Supply Management reported earlier that its manufacturing purchasing managers' index rose to 59.0 in October from 56.6 in September. Analysts had expected the index to decline to 56.2 in October, and the surprise uptick sparked fresh demand for the dollar by stoking sentiments that U.S. recovery continues to gain steam.

Elsewhere, the greenback continued to see support against most major currencies after the Bank of Japan said last week it was raising its monetary base target to an annual increase of ¥80 trillion from ¥60-70 trillion, a preemptive move to steer the economy away from deflationary decline while improving the chances of reaching inflation goals.

Further fueling greenback demand, a Japanese government panel overseeing the Government Pension Investment Fund approved plans on Friday for the fund to raise its holding of foreign stocks to 25% of its portfolio from 12%.

Meanwhile in the euro zone, the single currency came under pressure after the U.K.-based Markit Economics research group reported that its German manufacturing PMI fell to 51.4 in October from 51.8 the previous month, disappointing expectations for the index to remain unchanged.

Markit's manufacturing PMI for the entire euro zone ticked down to 50.6 this month from 50.7 in September. Analysts had expected the index to remain unchanged, and the dollar saw added support in a rather quiet session.

The US dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.04% at 87.49.

On Tuesday, investors will track data on U.S. factory orders as well as the results of U.S. congressional elections.