Investing.com — Most Asian currencies moved in a flat-to-low range on Wednesday, while the dollar firmed as commodity prices and continued uncertainty over the U.S. presidential race kept traders favoring the greenback.
The Japanese yen was an exception, gaining further ground against the dollar as a mix of short covering and positive economic data helped the currency reach its strongest levels in more than a month.
Commodity-linked currencies such as the Australian dollar and New Zealand dollar fell sharply as prices fell, with concerns about an economic slowdown in top commodity importer China showing little sign of improving.
Yen firm with BOJ rate hike in focus
The Japanese yen was the best performer in Asia, with the pair falling 0.3% to 155.10 yen, the lowest level since early June.
The yen’s rise followed a recovery last week, when the currency rose sharply in value amid suspected government intervention in the currency market.
But the sharp strengthening of the yen put pressure on shore positions against the currency, which in turn led to covering of short positions, fueling gains in the currency.
Some positive Purchasing Managers Index data also benefited the yen, as an unexpected contraction was largely offset by a recovery in the .
The focus is now squarely on next week, with recent inflation and PMI data fueling increasing speculation that the central bank will raise rates by 10 basis points.
The dollar extends recovery amid Fed scrutiny and political uncertainty
The and both rose slightly in Asian trading, extending the overnight recovery as worsening sentiment toward China and uncertainty over the U.S. presidential race boosted demand for safe havens.
Vice President Kamala Harris received strong support from the Democratic party following her endorsement as presidential candidate by President Joe Biden. A Reuters/Ipsos poll also showed her slightly outperforming Republican candidate Donald Trump.
Traders favored the dollar ahead of next week, when the central bank is widely expected to keep interest rates steady. But markets will be on the lookout for signals that the bank will cut rates from September.
Commodity-linked currencies are sinking due to China’s problems
The Australian dollar and New Zealand dollar, both tied to commodity prices and China’s economic prospects, were the worst performers in Asia on Wednesday. The pair fell 0.3%, while down 0.5%.
The Australian was also under pressure from weak PMI data for July.
The Chinese yuan pair remained close to highs last seen in November as sentiment towards China remained gloomy amid continued concerns over slowing economic growth in the country.
Concerns about China led to major losses in commodity prices, especially oil and metals.
The broader Asian currencies were also in trouble. The South Korean won pair and the Singapore dollar were both flat.
The Indian rupee’s pair remained near record highs above 83.7 rupees, receiving little support from a Union Budget aimed at tackling India’s large fiscal deficit.
