The Japanese yen further weakened against the dollar on Wednesday, hovering in a zone that last year triggered intervention, while the yuan slipped to a nine-month low as fears mounted about the extent of China's slowdown.
The yen has hit the key 145 per dollar level for four sessions, which triggered heavy dollar selling by Japanese authorities in September and October last year. It last weakened 0.45% versus the greenback to 146.22 per dollar, after hitting 146.260, a level not seen since November.
Finance Minister Shunichi Suzuki said on Tuesday authorities were not targeting absolute currency levels for intervention.
"Exactly when they'll intervene and at what level, I couldn't tell you, but I would expect it to be relatively soon, because inflation there still looks pretty bad," said Stephen Miran, co-founder at Amberwave Partners.
"Letting the currency continue to do this when the rest of the world has much higher yields has the potential of exacerbating inflation there even further."
Elsewhere in Asia, the yuan touched its lowest level since November in both the onshore and offshore markets as fears mounted about the extent of China's slowdown, falling as low as 7.3397.
That extended Tuesday's decline following Chinese data that missed forecasts and prompted Beijing to deliver unexpected cuts to its key policy rates as authorities there sought to shore up an economy that has rapidly lost steam in recent months.
The Australian dollar, often used as a liquid proxy for the yuan, plumbed nine-month lows in response to the Chinese data. It last fell 0.46% versus the greenback at $0.643.
"I really don't think that the backdrop is conducive for a sustained risk rally at this point," said Bipan Rai, global head of FX strategy at CIBC Capital Markets. "Not only the China data, it's also the fact that we're dealing with tighter monetary conditions globally, and that's going to crimp demand at the margin."
CENTRAL BANK WATCH
The pound was up after data showed British core inflation stayed strong in July, hitting a high of $1.2768 and was last up around 0.18% at $1.2725.
In Britain, core inflation, which strips out volatile energy and food prices, remained at 6.9% in July, flat versus the June reading, and higher than expectations in a Reuters poll for a reading of 6.8%.
The dollar index rose 0.213% at 103.420 after the release of the Federal Reserve's minutes showed central bank officials were divided over the need for more interest rate hikes at their last meeting. The euro was down 0.22% to $1.08795.
The New Zealand dollar, which had fallen to a nine-month low of $0.5932 in early Asian trade, rebounded after the Reserve Bank of New Zealand policy meeting, but last fell 0.27% versus the greenback at $0.594. The central bank held its cash rate steady as expected on Wednesday, but slightly pushed out when it expects to start cutting borrowing costs to 2025.
"The statement gave a clearly more hawkish tone, likely defying any dovish expectations," said Barclays research analyst Shreya Sodhani. "We think today's more hawkish statement and the governor's press conference suggest that the timing of rate cuts will likely be pushed back a bit."