Most Asian currencies rose against a retreating greenback on Thursday, driven by receding bets of a US rate hike this month and relief over a surprise swing back to growth in a private survey of Chinese factory activity.

The Indian rupee edged up 0.3% against the US dollar, bouyed by higher-than-expected GDP growth, while the yuan reversed some of its losses from the previous session where it had slumped to a six-month low.

In a glimmer of hope, China’s factory activity unexpectedly swung to growth in May from the previous month’s decline, driven by improved production and demand, helping struggling firms that have been hit by slumping profits, a survey showed.

On Wednesday, official data had showed that China’s factory activity shrank faster than expected in May on weakening demand.

Asian economies are heavily reliant on the strength of China’s economy, which has been wavering as a post-COVID recovery loses momentum.

“A key part of the rebound in Asian currencies today relates to the surprise swing back to growth in Chinese factory activity, which follows yesterday’s selling in the yuan and Asian currencies after disappointing official PMI data,” said Khoon Goh, head of Asia research at ANZ.

Meanwhile, the US dollar retreated from a two-week top against major peers as Federal Reserve officials on Wednesday pointed towards a rate hike “skip” in June, even as the passing of the US debt ceiling bill in the House of Representatives gave safe haven support to the greenback.

Separately, South Korea’s exports fell for an eighth straight month in May in annual terms, but the pace was slower than expected, with signs that the worst had passed for chip and China-bound shipments.

The won was 0.4% higher and leading gains among its Asian peers, while South Korean shares slipped 0.3%.

“We are starting to see a return of foreign inflows into the South Korean markets and an AI-led rally globally in leading tech names will further support the country’s position in the months ahead,” Goh said.

Asian FX, shares subdued as stalled US debt talks hit risk appetite

Sri Lanka’s rupee currency rose to its highest since April 2022 at 289 to the dollar, while stocks in Colombo rose 1.3% after the country’s central bank cut key interest rates by 250 basis points on easing inflation, signalling that the South Asian nation was emerging from a devastating financial crisis.

Equities in the region were mixed, with indexes in India and Singapore both up 0.2%, while stocks in Thailand slipped 0.5%.