TOKYO: The safe-haven Japanese yen and US dollar garnered demand on Wednesday as an aggressive tech-led selloff on Wall Street spilled over into Asia.
The risk-sensitive Australian dollar remained weak after a 0.8% slide against the greenback on Tuesday, while the New Zealand dollar fared even worse, hovering at a nearly seven-month low following a rise in the unemployment rate to the highest level since 2016. Against the Aussie, New Zealand’s currency languished at a 12-year trough.
Sterling wallowed near a seven-month low after British finance minister Rachel Reeves hinted at broad tax rises in her budget later this month.
“Risk-off sentiment has been pervasive across markets in the past 24 hours,” leading to “a stronger USD against all bar JPY and risk/growth sensitive currencies faring worse amongst the majors,” said Ray Attrill, head of FX research for markets at NAB.
“This is alongside GBP, which heard the message of upcoming fiscal tightening from UK Chancellor Reeves loud and clear.”
Selling dominated Asia stock markets early on Wednesday, with Japan’s Nikkei dropping 2.4% and South Korea’s KOSPI plunging 4.8%.
The U.S. dollar index – which measures the currency against the euro and sterling, along with the yen and three other peers – was steady at 100.18, after shooting as high as 100.25 for the first time since August 1.
The dollar has also been buoyed by sharp divisions among the Federal Reserve board on the correct path for policy, suggesting low odds for an interest rate cut at the next meeting in December.
Markets have also had to contend with a record-long government shutdown, which has all but halted the flow of macroeconomic data. This has put a lot of focus on the private ADP payrolls later on Wednesday.
The yen added about 0.2% to 153.42 per dollar , extending a 0.7% gain from Tuesday.
At the same time, the dollar was steady at $1.1483 per euro after rising 0.3% in the prior session to reach a seven-month top.
Sterling was flat at $1.3016 following Tuesday’s 0.9% slide.
The New Zealand dollar sagged 0.1% to $0.5635 after tumbling 1.2% on Tuesday and touching a seven-month low.
It dipped as low as NZ$1.1512 per Australian dollar following the labour market data, a level not seen since October 2013.
The Aussie drooped 0.2% to $0.6476.
In addition to the risk-off tone in markets, Australia’s currency was still smarting after the central bank signaled an extended rates pause when holding policy steady on Tuesday.
The Reserve Bank’s “post‑meeting statement did not read as hawkish as it could have, given the material upside surprise to inflation last week,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia, who sees risks skewed to further weakness towards support at around $0.6404.
Leading cryptocurrency bitcoin was also licking its wounds following a 6.1% slide on Tuesday to the lowest level since June 22. It was last trading little changed at around $100,317.
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