Most Asian currencies went up a little bit on Wednesday, as markets bet that economic headwinds would force the Federal Reserve to soften its “hawkish” stance. The Chinese yuan also went up as there were reports of government intervention in currency markets.
The yuan went up 0.2% to 7.2892, up from a low point that was close to 15 years ago. Reuters said that big Chinese banks that are owned by the government sold dollars to support both the onshore and offshore yuan because of how weak the currency has been lately.
Related: Asia’s markets fall as investors become less risk-averse and yields increase.
This week, the yuan fell sharply because of worries about the political situation in China. The offshore currency hit a record low. The fact that China’s GDP for the third quarter came in below what the People’s Bank of China had predicted also didn’t impress the markets.
After Beijing said again that it would keep its strict zero-COVID policy, investors were worried that China would do something else to upset the market.
Even more Asian currencies went up. The South Korean won went up by 0.1%, but the gains were small because people were worried that political tensions on the Korean peninsula would get worse. The Malaysian ringgit led gains in Southeast Asia with a 0.2% rise.
After falling more than 2% in the last four sessions, the dollar index and dollar index futures were mostly the same. U.S. Treasury yields also went down from their 14-year highs as rumours grew that the Fed might change its policy by December.
Even though the markets expect the Fed to raise rates by at least 75 basis points in November, they are now expecting a smaller increase in December. This year, rising interest rates pushed the dollar to its highest level in 20 years, which hurt Asian markets a lot.
The Japanese yen went against the trend and fell by 0.2% as traders continued to bet against the government getting involved in the currency market. The Bank of Japan has been reluctant to raise interest rates this year, even though they are at record lows. This has hurt the yen and made inflation worse in the country.
The government’s actions have helped the currency for a short time, but the yen has lost about 30% of its value this year.
The Australian dollar was the only one of the Antipodean currencies to go up after data showed that inflation hit a 32-year high in the September quarter.
Related: As a hawkish Fed weighed in, Asian stocks declined and experienced weekly losses.
The reading shows that the Reserve Bank of Australia may have slowed down its rate hikes too soon and that rates are likely to go up again soon.
