Asian foreign exchange markets traded with mixed momentum on Tuesday as a policy action by the People’s Bank of China (PBOC) pushed the yuan lower and renewed attention on regional growth and central bank moves lifted the South Korean won.
The U.S. dollar index was largely unchanged at 101.80. In individual pairs, USD/KRW slipped 0.5% to 1,339.30, reflecting a stronger won, while offshore USD/CNH rose 0.3% to 6.6690 and the onshore USD/CNY gained 0.3% to 6.6702. The Japanese yen was little changed at 157.88 per dollar amid light trading in Japan due to a holiday.
The yuan’s retreat followed the PBOC’s announcement that it would raise the foreign-exchange reserve requirement ratio by two percentage points to 6% from 4%, effective November 15. The central bank expects the move to withdraw about $24 billion from the financial system by absorbing some dollar liquidity held by banks. As a result, the offshore yuan was headed for its first decline in almost three weeks.
Despite the recent pullback, the Chinese currency has appreciated by more than 5% against the dollar so far this year. That gain has been supported, according to market commentary in the session, by resilient exports, ongoing trade surpluses and corporate currency conversions.
Analysts at DBS observed that the dollar had not found much support from renewed risk aversion as markets entered November with caution ahead of the U.S. midterm elections. Falling oil prices and geopolitical developments in the Middle East were cited as key influences on risk sentiment.
Brent crude dropped over 7% on Monday after Tehran said contacts with Washington aimed at ending the eight-month conflict were continuing. Reports of diplomatic engagement involving Iran and Qatar also helped conditions for lower prices by raising expectations of progress toward a resolution and steadier regional oil supplies.
Beyond the immediate election-driven caution, investors will assess whether cheaper oil and Friday’s October U.S. employment report are sufficient to prompt the Federal Reserve to reassess its tightening bias.
The rebound in the won follows an outsized quarterly advance of about 13% against the dollar in the third quarter, the strongest quarterly gain since late 1998. South Korea’s data flow gave fresh support: October exports rose 93.7% year-on-year, led by a remarkable 259.4% surge in semiconductor shipments. Inflation in South Korea eased slightly to 2.8% from 2.9%.
In South Asia, the Indian rupee opened little changed. Observers noted that the sharp fall in crude could provide relief to India as an oil-importing economy, although ongoing dollar demand and technical resistance were likely to limit immediate gains for the currency.
Australia’s central bank raised its cash rate by 25 basis points to 4.85%, marking the fifth increase this year and taking the policy rate to its highest level since late 2008. Market reaction was muted for the Australian dollar, which slid as much as 0.4% despite the widely expected move, after the Reserve Bank warned inflation would remain elevated through much of 2027 and that upside risks had increased. The New Zealand dollar eased 0.1% to $0.5615.
Sterling was largely flat after earlier gains based on data showing the United Kingdom’s manufacturers recorded their strongest output growth in more than two years. The Bank of England is expected to raise its policy rate to 4% from 3.75%, which would be its first increase since August 2023. Central bank decisions in Norway and Sweden are also scheduled this week.
Looking ahead, the regional economic calendar includes Hong Kong’s third-quarter GDP and retail sales data, Indonesia’s third-quarter GDP figures, and inflation releases from Taiwan, Thailand and the Philippines. Bank Negara Malaysia is expected to keep its policy rate unchanged at 2.75% on Thursday.
The market reaction on Tuesday reflected a mix of liquidity effects from the PBOC’s reserve requirement hike, country-specific data flows such as South Korea’s export surge, and broader risk drivers including oil price moves and upcoming central bank actions.