Asian currencies experienced a pullback on Wednesday, while the U.S. dollar strengthened after a robust overnight rally and in anticipation of the outcome of the Federal Reserve meeting. The US dollar‘s position was further strengthened by weak Chinese PMI data, which pointed to continued economic weakness in October. This had a negative impact on sentiment towards regional markets.
Despite the People’s Bank of China setting a stronger midpoint, the Chinese yuan remained flat on the pessimism generated by a private PMI survey. The survey highlighted a contraction in China’s manufacturing sector in October, contributing to the Yuan’s flat performance.
Other currencies tied to the Chinese economy, such as the Australian dollar and the South Korean won, saw small declines. The South Korean won was particularly affected by disappointing export and import data for October.
The Indian rupee, on the other hand, strengthened slightly, supported by falling oil prices. Meanwhile, the Japanese yen recovered modestly from a one-year low after Japan’s top financial officials warned against speculation following minimal policy changes by the Bank of Japan.
Speculation of possible government intervention was fueled as the yen approached a threshold that previously resulted in a $60 billion government intervention. Uncertainty surrounding the Federal Reserve meeting and a widening gap between U.S. and Japanese yields added to the pressure on the Yen.
At the same time, both the dollar index and dollar index futures posted modest gains in Asian trading.