TOKYO- The Australian dollar tumbled to a four-month low on Wednesday after weaker-than-expected economic growth raised expectations for earlier interest rate cuts, while South Korea’s won stabilized after a decision to impose martial law was reversed.
The Chinese yuan tried to pull away from its weakest in more than a year as the People’s Bank of China set a stronger official trading band for the currency.
The US dollar recovered from a three-week low versus the yen and ticked up against other major rivals as traders waited on more labor market data for clues on the path for Federal Reserve policy.
The euro held its ground above its recent two-year trough, even as French lawmakers prepared to vote on no-confidence motions later in the day that are all but certain to topple the government.
The Aussie sank as much as 1.22 percent to the lowest since Aug. 4 at $0.6408 before trading at $0.6434 as of 0449 GMT. The New Zealand dollar tracked those declines, losing 0.5 percent to $0.5850.
Australia’s economy grew at the slowest annual pace since the pandemic in the third quarter.
Markets moved to almost fully price in a rate cut next April at 96 percent from 73 percent before, and see a 35 basis points easing for May, from 28 bps before.
“The main takeaway from the September update is that an expected tentative recovery in private demand has not formed,” said Pat Bustamente, senior economist at Westpac.
“The weakness of annual growth in spending and continued pressures on household disposable income – even with tax cuts flowing – points to a weaker underlying picture.” The won was little changed at 1,413.80 per dollar after starting trading with a 0.5 percent jump that reversed almost all of the previous day’s losses, when it dropped as low as 1,443.40 per dollar for the first time since October 2022 following President Yoon Suk Yeol’s shock martial law declaration.
