The Japanese yen and Australian dollar rose 0.1% and 0.3%, respectively, after separate purchasing managers’ index (PMI) readings showed some resilience in local manufacturing activity through August.
PMIs from the U.S. and euro zone are due later in the day and are also expected to offer more signals on business activity in the world’s largest economies.
But concerns over an economic slowdown in China continued to weigh on sentiment toward Asian markets, although a string of supportive measures from the People’s Bank of China (PBOC) helped stem losses in the yuan.
The dollar index and dollar index futures fell slightly in Asian trade on Wednesday, but remained close to their highest levels since early-June.
Markets were focused squarely on an address by Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium this Friday, which is expected to offer more cues on U.S. interest rates.
Analysts warned that Powell could flag an era of higher baseline rates, especially given that U.S. inflation remains sticky and the labor market remains strong.
Even if the Fed doesn’t raise rates higher this year, the central bank is still expected to keep rates higher for longer, with recent resilience in the U.S. economy also giving the bank more headroom to do so.
U.S. Treasury yields surged on this notion, with the 10-year rate touching its highest level since the early 2000s. Higher U.S. rates bode poorly for Asian markets, given that they narrow the gap between risky and low-risk yields. This notion had battered most Asian currencies over the past year, with regional units now struggling to recover recent losses.
The Taiwan dollar rose 0.2% on Wednesday, while the rate-sensitive South Korean won added 0.2%.
The Indian rupee rose 0.1% but remained close to record lows, while the Thai baht led gains across Southeast Asia with a 0.3% rise. The baht benefited from some signs of political stability in Thailand, after the parliament elected a new Prime Minister after months of political deadlock.
The yuan rose slightly on Wednesday, supported by a substantially stronger-than-expected daily midpoint from the PBOC.
The central bank has set a series of strong midpoints to support the yuan, and also cut interest rates by a smaller-than-expected margin this week to stem further yuan weakness.
Sentiment towards the yuan has largely soured amid growing concerns over a Chinese economic slowdown, with a looming default for the property sector adding to its woes.
But Beijing has shown reluctance in letting the yuan depreciate further beyond the 7.3 level, with reports showing that state banks were also selling dollars to lap up extra yuan liquidity.
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