Most Asian currencies moved in a flat-to-low range on Thursday as the dollar came off 20-year highs, with focus turning to an upcoming European Central Bank meeting for more cues on global monetary policy tightening.

for more cues on global monetary policy tightening.

China’s yuan and the Hong K

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ong dollar traded sideways, while the South Korean won sank 0.6%.

Japan’s yen was an outlier, falling 0.4% and hovering around 24-year lows despite the country’s second-quarter GDP being revised higher. The outlook for Japan’s economy has been sullied by rising inflation and a new COVID-19 outbreak in the country.

The Bank of Japan’s reluctance to hike interest rates has also battered the yen this year, given that most other major economies are carrying out tightening cycles to combat high inflation.

Asian currencies took little relief as the dollar index retreated slightly from 20-year highs. Dollar index futures also fell 0.1% on Thursday.

Traders were now awaiting an interest rate hike by the European Central Bank (ECB) later in the day, which could support the euro and spur further losses in the dollar.

The euro appeared to have trimmed some losses against the greenback, trading down 0.1% at 0.9988 on Thursday.

The ECB is expected to raise interest rates by 50 basis points to 0.5%, bringing them into positive territory for the first time in 11 years to combat high inflation. But the central bank faces a balancing act, given that economic activity in the eurozone has slowed significantly due to a brewing energy crisis.

Russia recently shut a key gas pipeline to Europe, pushing up natural gas prices.

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Asian currencies fell sharply this week on growing fears of a more hawkish U.S. Federal Reserve. The prospect of U.S. interest rates rising further has made investors wary of buying into regional currencies, causing steep losses this year.

In the Asia-Pacific region, Australia’s dollar sank 0.3% after data showed the country’s trade balance shrank more than expected in July.

Australian exports fell in July from the prior month, likely facing pressure from waning demand in major market China.

Data on Wednesday showed China’s trade surplus fell significantly in August, as the economy faces pressure from renewed COVID lockdowns and an energy shortage.