The Australian dollar plunged after consumer prices rose less than expected and the HSBC April flash Performance of Manufacturing Index suggested China's manufacturing sector is on track to record a fifth straight month of contraction, though there was a slight increase from March.
Quarter-on-quarter CPI in Australia rose 0.6%, compared to an expected first quarter gain of 0.8%, showing slowing non-tradable component prices outside of administered prices such as education, healthcare and utilities. Among the surprises was a 1.5% fall in consumer durable categories.
Separately, the HSBC PMI rose to 48.3 in a preliminary assessment for April from the March final of 48,, leaving room for government steps on the economy, said HSBC chief China economist Qu Hongbin. China is a top destination for Australian exports such as iron ore.
'Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident as both new export orders and employment contracted. The State Council released new measures to support growth and employment after the release of Q1 GDP. Whilst initial impact will likely be limited, they signalled readiness to do more if necessary. We think more measures may be unveiled in the coming months and the PBOC will keep sufficient liquidity.'
AUD/USD traded at 0.9305, down 0.65%, after the HSBC survey from flat to slightly higher beforehand.
Bank of Japan Governor Haruhiko Kuroda on Wednesday said in parliamentary testimony that the economy is still on track toward stable 2% inflation and that once reached, support to fiscal policy will also wane.
'We won't consider supporting fiscal policy by keeping borrowing costs low after we have anchored inflation at 2%.'
The remarks boosted the yen slightly with USD/JPY trading at 102.60, down 0.01%, after the testimony.
Later, the Bank of Thailand is due to make its monetary policy decision and expected to stand pat.
Overnight, the dollar traded mixed to lower against most major currencies after investors priced in U.S. housing and regional factory data and sought fresh steering currents in a listless session.
Industry data revealed that existing home sales in the U.S. fell by 0.2% in March to 4.59 million units, and while soft, the numbers did beat expectations for 4.55 million units.
A separate report showed that the Richmond Fed manufacturing index jumped to 7 this month, from a reading of -7 in March, beating expectations for a reading of 0.
The numbers gave the greenback some support, though many investors remained in standby mode ahead of a speech European Central Bank President Mario Draghi on Thursday, which allowed the greenback to edge lower in quiet trading.
Euro zone inflation has now been in the ECB’s danger zone of below 1% for six straight months, adding to pressure on policymakers to implement fresh stimulus measures to shore up the region's fragile recovery.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.06% at 79.93.
On Wednesday, the U.S. is to publish reports on new home sales and manufacturing activity.