Asia FX slumps, dollar steadies as Poland strike sours sentiment By

By Ambar Warrick 

Investing.com– Most Asian currencies sank on Wednesday as a potential Russian missile strike on Poland drove investors away from risk-driven assets, while the dollar steadied from recent losses as investors sought safe haven in the greenback. 

The and both steadied around 106.58, recovering from mild losses in the prior session, while also saw increased bids.

Wednesday’s gains saw the dollar brush off data that showed U.S. at a 14-month low. The reading gave further credence to bets that inflation has likely peaked in the country, which is expected to elicit a less hawkish stance by the Federal Reserve.

Several Fed members also called for smaller rate hikes, while bets that the in December grew sharply this week. 

While this scenario is positive for Asian currencies in the near-term, sentiment was battered on Wednesday as a missile of Russian make killed two people in eastern Poland.

The move, if linked to Russia, would mark the first time since Russia’s invasion of Ukraine that Moscow has attacked a member of the North Atlantic Treaty Organization, and could spark a potential escalation in the conflict. 

Risk assets saw steep losses on Wednesday in anticipation of more details on the strike. 

and the were among the worst performing Asian currencies on Wednesday, dropping 1.1% and 0.7% to the dollar, respectively, while the shed 0.6%. 

More signs of economic duress in China also further soured sentiment towards Asian markets, with data showing Chinese sank to a seven-year low in October.

This followed dismal readings on and earlier this week, which indicated that COVID-induced rifts in Asia’s largest economy were deepening. 

The country is also struggling with its worst COVID outbreak in six months, which has brewed more uncertainty over its economic prospects.

Overnight gains in oil prices dragged the down 0.6%, while the led losses across Southeast Asia with a 0.5% decline.

Losses in the were somewhat tempered by data showing local wages grew more than expected in the quarter to September. 

The reading gives the Reserve Bank more headroom to keep raising interest .