Asian currencies retreated on Wednesday, while the US dollar strengthened after a robust rally overnight and ahead of the outcome of the Federal Reserve meeting. The US dollar’s position was further strengthened by weak Purchasing Managers’ Index (PMI) data from China, which indicated that economic weakness continued through October. This development had a negative effect on sentiment towards regional markets.
Despite the People’s Bank of China setting a stronger midpoint, the data remained stagnant due to pessimism from a private PMI survey. The survey underlined a contraction in China’s manufacturing sector in October, which contributed to the yuan’s flat performance.
Other currencies linked to the Chinese economy, such as the Australian dollar and the South Korean won, saw small declines. The South Korean won was mainly hit by disappointing export and import data for October.
The Indian rupee, on the other hand, rose slightly, boosted by falling oil prices. Meanwhile, the Japanese yen recovered modestly from a one-year low as Japan’s leading financial officials warned against speculation following minimal policy changes by the Bank of Japan.
Speculation around possible government intervention was fueled as the yen approached a threshold that previously resulted in a $60 billion government response. The uncertainty surrounding the Federal Reserve meeting and the growing gap between US and Japanese interest rates increased pressure on the yen.
At the same time, both countries experienced modest growth in Asian trade.
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