March 26 (Reuters) - A look at the day ahead in Asian

markets.

Chinese markets will be under close scrutiny on Tuesday, as

signs emerge that the recovery for much of this year in asset

prices and investor sentiment may be fading as the first quarter

draws to a close.

The broader tone across Asia is fairly muted too with

regional stocks on the defensive as investors grapple with a

resilient dollar and higher U.S. bond yields in the wake of last

week's central bank fireworks.

Tuesday's calendar is relatively light. The latest reading

of Japan's service sector producer price inflation is

potentially the most significant release, while Australian

consumer sentiment is also on tap.

Exchange rates are in the spotlight, with the yen steadying

after Japan's top currency diplomat said its recent "big slide"

against the dollar did not reflect fundamentals.

China's yuan, meanwhile, goes in to Tuesday on the back of a

roller-coaster couple of days. It sank on Friday and rebounded

on Monday thanks to suspected dollar selling by state-owned

banks as the central bank set its daily 'fixing' rate much

stronger than analysts had expected.

The People's Bank of China set the yuan fixing rate at

7.0996 per dollar, some 1,300 basis points lower than the

market's neutral estimate of 7.23. Analysts at Deutsche Bank

said this marked the largest strengthening bias since November.

According to analysts at Rabobank, this suggests Beijing

does not want the yuan to weaken excessively ahead of the U.S.

presidential election in November.

Whatever the reasoning, it was a dramatic reversal from

Friday, when the offshore yuan slumped 0.75% against the dollar

for its biggest fall in over a year.

That was on huge volume too - spot volume on trading

platform EBS was $24.2 billion, the fourth highest ever,

according to CME Group, which owns EBS.

There doesn't appear to be any clear explanation for the

yuan's swings, so it's no surprise that the volatility and

uncertainty is spilling over into other assets - blue chip

stocks fell for a third day on Monday, the longest losing streak

since January.

Sentiment toward China will not have been helped by news

that U.S. and British officials filed charges, imposed

sanctions, and called out Beijing over an alleged sweeping

cyberespionage campaign that hit millions of people - including

lawmakers, academics, journalists and more.

Washington and London accused the hacking group nicknamed

"APT31" of being an arm of China's Ministry of State Security

and reeled off a laundry list of targets: White House staffers,

U.S. senators, British parliamentarians, and government

officials around the world who criticized Beijing.

Trade tensions are percolating again too, after the FT

reported that China is seeking to block the use of Intel and AMD

in government computers, and sideline Microsoft Windows and

other foreign-made software in favor of domestic options.

Here are key developments that could provide more direction

to markets on Tuesday:

- Japan services PPI (February)

- Australia consumer sentiment (March)

- Hong Kong trade (February)

(By Jamie McGeever;)