- The Japanese yen weakened sharply against the dollar on Tuesday and the Australian dollar also fell after a slew of data in the region pointed to mixed conditions for demand, with China on a high note, but Japan and Australia a bit weaker domestically.

USD/JPY traded at 101.50, up 0.17%, after the quarterly survey and May cash earnings.

Japan''s quarterly Tankan survey of business sentiment came in at plus 12, compared to an expectation among major manufacturers at plus 16 in June, compared to plus 17 in March. This is the first drop in six quarters since it slumped to minus 12 in December 2012.

Japan''s May average cash earnings rose 0.8%, the third staright rise for the key data to determine if sustained consumer price inflation of 2.0% by 2015 is possible.

The Reserve Bank of Australia holds a policy board meeting and will announce its decision at 1430 Sydney time (0430 GMT). For the tenth meeting in a row, the RBA is expected to leave the cash rate unchanged at a record low 2.5%, but there is a greater possibility the bank may revert to the dovish stance.

AUD/USD traded at 0.9418, down 0.15%, ahead of the RBA and after a private survey on manufacturing. Eyes in Australia will also closely watch manufacturing data due from China.

Earlier, Australia''s June AI Group manufacturing index showed a drop of 0.3 point to 48.9 with respondents to the survey citing a strong currency. The manufacturing index rose a surprise 4.4 points in May.

The RBA Commodity Price Index is scheduled for release at 1630 (0630 GMT). The commodity index was expected to drop further in June after a 1.1% month-on-month fall in May.

In China, the June CFLP manufacturing PMI rose to 51, matching expectations and up from 50.8, marking the fourth straight monthly improvement and the best reading since last November.

"The PMI continued to rise indicating that the tendency towards economic stabilization is basically established. Various policy measures to stabilize growth have taken effect," said Zhang Liqun, a government economist, on the CFLP PMI.

As for HSBC''s PMI, the final came in at 50.7,just a shade below the surprisingly strong flash reading of 50.8.

The surveys strengthen the argument that China''s economy has finally stabilized after a difficult start to 2014.

"The HSBC China Manufacturing PMI final reading for June rebounded to 50.7, up from 49.4 in May, and relatively unchanged from the flash reading. This confirms the trend of stronger demand and faster de-stocking," said HSBC chief China economist Qu Hongbin.

Overnight, the dollar traded largely lower against most major currencies after a disappointing regional U.S. factory data sparked concerns that Thursday''s widely-watched jobs report may come in sluggish and sway monetary authorities to leave interest rates low for longer than once thought.

The National Association of Realtors reported earlier that pending home sales jumped 6.1% in May from April, far surpassing market calls for a 1.5% reading.

Still, the dollar slipped after industry data released earlier revealed that the Chicago purchasing managers’ index declined to 62.6 this month from 65.5 in May, missing expectations for a 63.0 reading.

Investors were turning their attention to the U.S. June nonfarm payrolls report, which will release a day early on Thursday due to the Independence Day holiday on Friday, avoiding the dollar during the trading session ahead of time.

Markets were eager for the release of a key manufacturing gauge on Tuesday as well.

Meanwhile in Europe, the euro saw support after preliminary data revealed that the euro zone''s annual inflation rate remained unchanged at 0.5% in June, easing pressure on the European Central Bank to announce fresh monetary easing measures.

It was the ninth consecutive month in which the inflation rate was below 1%. The ECB targets an inflation rate of close to but just under 2.0%.

The core inflation rate ticked up to 0.8% from 0.7% in May.

The ECB announced a package of measure aimed at staving off the threat of deflation on June 5, including cutting rates to record lows and imposing negative rates on lenders to encourage lending to consumers.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.05% to 79.86.

On Tuesday, the dollar should move on the Institute of Supply Management''s report on U.S. U.S. manufacturing activity.

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