The Australian and New Zealand dollars declined along with the yuan on Wednesday after a surprise deterioration in Chinese factory activity stoked worries about the country's sputtering post-pandemic recovery. Traditional safe-haven currencies the dollar and yen outperformed the euro and sterling. The yen received additional support after Japan's top currency diplomat warned on Tuesday that officials were watching the currency closely following its slide to a six-month low, which has raised the spectre of intervention.

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The dollar languished below the psychological 140 yen level on Wednesday after getting knocked back from a six-month high after Japanese officials met on Tuesday to discuss their currency. The Australian dollar rode a rollercoaster after it jumped on heated local inflation data only to be dragged lower moments later by more signs of a slowdown in China, a major trading partner. "We have to remember that the Aussie is a pro-growth currency, strongly linked to the outlook for commodities, and we've seen commodities under pressure of late," said Rodrigo Catril, senior foreign-exchange strategist at National Australia Bank.

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The US dollar has pulled back a bit against the Japanese yen, giving back some of the monster run we have seen recently.

The British pound has been all over the place against the Japanese yen as the Bank of Japan calls for an emergency meeting.

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The yen softened slightly against the dollar on Tuesday after Japan's top finance diplomat Masato Kanda said authorities were closely watching foreign exchange market moves, would "respond appropriately", but were not focussing on particular levels. The dollar was last up 0.12% on the day at 140.61 yen , having traded slightly lower immediately before Kanda's remarks. Kanda was speaking after a meeting involving top officials from the Ministry of Finance, Bank of Japan and the financial watchdog.

Japan will closely watch currency moves and won't rule out any options, its top currency diplomat said on Tuesday, after financial authorities met in the wake of the yen's slide to a six-month low against the U.S. dollar. Currency rates should move stably, reflecting fundamentals, and excessive volatility is undesirable, Masato Kanda, vice finance minister for international affairs, told reporters. Kanda was speaking after a meeting with counterparts from the Bank of Japan (BOJ) and the country's financial watchdog.

The yen was last at 140.43 per dollar, flat on the day, having traded as soft as 140.93 before the announcement. Senior officials from the Ministry of Finance, Bank of Japan and Financial Services Agency will meet from 0830 GMT (1730 Tokyo) to discuss international financial markets, the finance ministry said.

The US dollar initially tried to rally against the Japanese yen on Monday but found a bit of resistance above, and it now looks like it’s ready to pull back a bit.

The British pound pulled back on Monday as the market had gotten too far ahead. At this point, the market is likely to pull back toward the ¥172.50 level, where I would expect buyers to return.