NEW YORK: The US dollar slipped ahead of a policy announcement by the Federal Reserve on Wednesday, while risk-sensitive currencies such as the Australian dollar and Chinese yuan strengthened after China's Evergrande said it would make a bond coupon payment.
Property giant and Asia's biggest junk bond issuer Evergrande said it "resolved" one payment due on Thursday via a private negotiation, easing concerns of default and possible contagion risk, while the People's Bank of China injected 90 billion yuan into the banking system to support markets.
"Being able to make tomorrow's bond coupon payment, that definitely lifted risk sentiment overnight and you saw a typical follow-through reaction in risk currencies, so Canadian dollar high, Aussie dollar higher, Kiwi dollar higher - that was kind of an understandable reaction," said Erik Bregar, an independent FX analyst in Toronto.
Still, uncertainty remains whether the developer will be able to pay the coupon on its offshore dollar bonds, due on Thursday.
The Australian dollar rose 0.28% versus the greenback at $0.725 after rising as much as 0.49% to $0.7268 while the Canadian dollar rose 0.38% versus the greenback at 1.28 per dollar.
The offshore Chinese yuan strengthened versus the greenback at 6.4628 per dollar.
All eyes will be on the Fed later in the session for its policy announcement for signs of when the US central bank plans to begin trimming its monthly asset purchases as well as any insight into the timing of a possible rate hike.
Dollar holds near 1-month high
"There is definitely a more clear consensus going into this meeting, vis-a-vis the previous one, people are looking for a more clear timeline on taper, we have all heard these expectations about a signal to start in November then the actual pace of purchase start declining in September, you could argue expectations are a tad hawkish coming in," Bregar said.
The dollar index fell 0.07%, with the euro up 0.09% to $1.1734.
The safe-haven Japanese yen weakened 0.27% versus the greenback at 109.51 per dollar in the wake of the Bank of Japan's decision to keep policy on hold.
Sterling was last trading at $1.3643, down 0.12% on the day ahead of a policy announcement by the Bank of England on Thursday, with expectations for a rate hike being pushed down the road by investors.
In cryptocurrencies, Bitcoin last rose 4.58% to $42,457.03 following three straight days of declines.
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