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Foreign exchange and sovereign debt markets were calmer in early Asia-Pacific trading on Tuesday after a rocky return for the Chinese currency from the lunar new year break a day earlier. 

The dollar index was holding just above the 97 mark after climbing to its highest level since mid-December on Monday. 

In China the onshore renminbi, which is constrained by a trading band set by China’s central bank every morning, was steady at Rmb6.7895 per dollar after falling 0.7 per cent on Monday as trading reopened after the week-long lunar new year break. The offshore renminbi was also basically flat on the day at Rmb6.8003.

ING analysts noted that Chinese markets on Monday “reopened to the worst post-lunar new year start in more than a decade amid reports of two local borrowers defaulting on their debt obligations and the yuan playing catch-up with the emerging market currency sell-off over the holiday.” 

After weakening 0.6 per cent on Monday the Japanese yen slipped further, down 0.1 per cent to ¥110.53 per dollar, its lowest level for the year so far. The pound was 0.1 per cent firmer at $1.2864. 

Sovereign debt yields rose, with US 10-year Treasuries 1 basis point higher at 2.666 per cent and the Australian note up 3bp at 2.094 per cent. The Japanese equivalent maturity bond was also 1bp higher at minus 0.026 per cent. Bond yields move inversely to prices.

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