While investors’ attention shifted to U.S. data and the Federal Reserve, the euro held steady on Wednesday and riskier currencies gained ground thanks to hopes that China will eventually be freed from COVID restrictions, which will help GDP.
Following a larger-than-expected decline in German inflation, the euro fell 1% over night, its biggest loss in over two months, but it gradually recovered from three-week lows to $1.0570 in Asian trade.
The yuan climbed 0.4% to 6.8913 per dollar, moving back near Tuesday’s four-month high, while the trade- and China-sensitive Australian dollar increased 1% to $0.6800, recovering overnight losses.
China’s state-run media declared a “final victory” against the disease, encouraging market speculation that China’s rule-loosening and openings were irreversible. The discussion of supporting the housing industry also improved the atmosphere on the stock markets.
In anticipation of stronger tourism as a result of China removing its travel quarantine, the Thai baht has reached six-month highs. On Tuesday, the Singapore dollar reached an 18-month high.
Larger swings were restrained in the still holiday-lit Asian session by impending economic data from the US and the release of the Federal Reserve meeting minutes from last month. The head of FX at National Australia Bank said, “We’re back into some A-league economic data, so maybe we’ll get some more fundamentally-driven price action out of that.”
At 130.83 yen to the dollar, the yen was 0.1% stronger.
The decline in the euro was mostly responsible for the U.S. dollar index’s 1% gain to 104.73 on Tuesday and its slight decline to 104.57 on Wednesday. The kiwi edged up 0.4% to $0.6273 as sterling remained steady at $1.1973.
Headline German CPI dropped from 10% in November to an annual 8.6% in December, below the expected 9.1%, according to statistics released on Tuesday, which caused the euro to fall and the bund to rise.
