Currency markets subdued as policy decision looms

The G3 currencies were forecast to mark time on Wednesday in Asian trading, on the back of another listless offshore session with the Federal Reserve’s decision on policy looming, a day before a European Central Bank meeting.

However, China’s official manufacturing PMI, scheduled for later in the day, could spice up local trading, with markets on the look-out for signs that the second largest economy in the world is stabilising because of increased policy support. Any negative news would raise tensions in a market already increasingly doubtful that both the ECB and the Fed will carry out enough action to spur their economies.

The euro last stood at $1.2294, having traded between $1.2249 and $1.2331 on Tuesday, a range that suggested little conviction in the market. Against the yen, it was at an equally subdued 96.04, after trading in between 95.75 and 96.28 on Tuesday.

However, investors were able to take some profit on high-beta currencies such as the Australian dollar, pushing it down from its four-month high of $1.0538 to $1.0488. The Aussie also fell back from a record peak against the euro, which climbed to A$1.1718 from a low of A$1.1638.

Traders put many of the moves down to month-end flows in addition to positioning prior to the key event risks.