Asian currencies strengthened Wednesday as the US dollar extended recent losses ahead of key payrolls data, while the Chinese yuan remained steady despite softer inflation readings. The Australian dollar surged to a three-year high following hawkish signals from Reserve Bank of Australia officials, while the Japanese yen also firmed after Prime Minister Sanae Takaichi's landslide election victory.

The yuan hovered around 6.91 per dollar, showing little reaction to January consumer price index inflation data that came in weaker than expected. Producer prices contracted for a 40th consecutive month, underscoring persistent disinflationary pressures in China's economy. The data was partially affected by the timing of Lunar New Year celebrations, which fell later in 2026 and will include an extended nine-day break starting February 15.

Australian dollar gains were driven by Deputy Governor Andrew Hauser's comments that inflation remained too high and interest rates weren't sufficiently restrictive. His remarks, coming a week after the RBA's first rate hike in two years, suggested potential for additional tightening. Meanwhile, the dollar index fell between 0.1% and 0.2% in Asian trade, extending losses from earlier in the week as softer December retail sales data raised concerns about slowing US economic growth ahead of Wednesday's January labor market report.