Investing.com-- Most Asian currencies moved in a tight range on Wednesday, with the Chinese yuan trading sideways after weak business activity readings highlighted the impact of a bitter Sino-U.S. trade war.
The Australian dollar was an outperformer, albeit marginally, following stronger-than-expected consumer inflation data for the first quarter. The reading sparked some questions over just when the Reserve Bank will cut interest rates further.
The Aussie, along with most other Asian currencies, was sitting on strong gains for April, as they benefited from weakness in the dollar on uncertainty over U.S. President Donald Trump’s policies.
The Japanese yen was the biggest beneficiary of this trend, and outperformed its Asian peers in April on heightened safe haven demand. The currency weakened slightly on Wednesday following soft industrial production and retail sales data.
The dollar index and dollar index futures steadied in Asian trade, but were set to lose between 4.5% and 5% in April.
Chinese yuan flat as weak PMIs highlight trade war impact
The Chinese yuan moved little on Wednesday, with the USDCNY pair hovering around 7.2683 yuan.
Official purchasing managers index data showed Chinese manufacturing activity shrank more than expected in April, while overall activity also weakened in the wake of a dire tariff exchange between Beijing and Washington.
While private PMI data still showed some resilience in manufacturing activity, the trend was clear- Chinese exports were facing a sharp drop in overseas export orders after Trump imposed 145% tariffs on Chinese goods.
Wednesday’s PMI data highlighted the impact of a Sino-U.S. trade war on Chinese businesses, setting up the economy for a weak start to the second quarter of 2025.
The weak data also puts more pressure on Beijing to dole out increased stimulus measures.
The yuan was set to lose about 0.2% in April amid heightened trade tensions. While Beijing was seen loosening its hold on the yuan earlier in the month, a spate of recent strong midpoint fixes showed discomfort with greater yuan weakness.
Asia FX heads for April gains, yen outperforms
Barring the yuan, most other Asian currencies were headed for gains in April, in part driven by dip-buying from their March losses, as well as sustained weakness in the dollar.
The Japanese yen was the best performer, with the USDJPY pair falling over 5% in the month. Focus is now on the Bank of Japan, which is widely expected to keep rates unchanged at the conclusion of a two-day meeting on Thursday.
The Australian dollar’s AUDUSD pair was trading up 2.4% for April. The pair rose 0.3% on Wednesday following stronger-than-expected first quarter inflation data.
While core inflation still fell within the RBA’s target range, the reading sparked some uncertainty over just when and by how much further the central bank will cut interest rates.
The South Korean won’s USDKRW pair, the Singapore dollar’s USDSGD, and the Taiwan dollar’s USDTWD pair were trading down between 2% and 3% for April.
The won firmed on Wednesday even as media reports showed prosecutors were searching the private residence of ousted President Yoon Suk Yeol. The move could herald more political ructions in the country.
The Indian rupee firmed slightly, with the USDINR pair falling 0.1% after a muted performance in April.
Tensions between India and Pakistan rose this month following a deadly attack on a tourist site in India’s Kashmir, which New Delhi blamed on Islamabad.
Pakistan on Wednesday said it had “credible intelligence” that India was planning to carry out military action against the country in the next 24 to 36 hours, warning against the move.