 "yuan, notes")
China's main stock index fell one per cent and the Australian dollar slipped on Wednesday after Moody's cut its sovereign credit rating on China.
Asian shares also slipped, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.2 per cent, despite modest gains on Wall Street overnight.
Japan's Nikkei stock index was, however, up 0.4 per cent.
The Aussie fell as much as 0.3 per cent to $0.7452 soon after the Moody's announcement downgrading China to A1 from Aa3. The yuan was marginally weaker at 6.8949 per dollar while the Shanghai stock index fell one per cent to 3031.39 points.
Moody's said growing leverage in China prompted the downgrade, and warned about slowing economic growth. China's massive debt been at the centre of concerns among economists and Beijing in recent months, and has rattled global financial markets since late last year.
"The downgrade reflects Moody's expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows," Moody's said in a statement.
Moody's China downgrade would probably not have a much broader spillover impact on global financial markets, said Suan Teck Kin, economist for United Overseas Bank in Singapore, noting that Moody's economic growth estimate seemed "too pessimistic".
"If you look at FX reaction...we have a bit of a decline in CNH and Aussie dollar but other than that you can see that the reaction is quite muted, even for the CNH," Suan said.
"You don't see a major, sharp reaction. I think that partly has to do with...the (growth) assumption that Moody's used in this statement," he said.
Chinese authorities have stepped up regulatory curbs to defuse financial risks and have cracked down on risky lending practises, with the central bank moving toward tighter policy.
The U.S. dollar pulled away from recent 6-1/2 month lows, as the release of President Donald Trump's budget proposal raised hopes that his administration's policies would move forward.
Trump's first full budget plan calls for an increase in military and infrastructure spending but also cuts social spending in areas such as healthcare and food assistance.
U.S. Treasury Secretary Steven Mnuchin said he hoped to get tax reform passed this year, though this would not happen by August.
"Of course we're not really sure of the details of the budget plan, and what form it will finally take, but it has given the market the perception that everything is moving forward again, after recent distractions such as 'Russia-gate'," said Mitsuo Imaizumi, Tokyo-based chief foreign-exchange strategist for Daiwa Securities.
Political turmoil following Trump's recent firing of FBI Director James Comey, who was overseeing an investigation into possible links between the president's election campaign team and Russia, had raised fears that his administration's promised tax reform and fiscal stimulus would be derailed.
"Expectations that the Fed will hike next month are also supporting the dollar. Though a hike is not a done deal, it is still widely expected," Imaizumi said.
Investors awaited the minutes of the Fed's latest policy meeting, scheduled to be released at 1800 GMT later on Wednesday.
The dollar index, which tracks the greenback against a basket of six major rivals, was steady on the day at 97.327, pulling away from its lowest levels since November plumbed earlier this week.
The dollar was nearly steady against the yen at 111.78, while the euro was steady on the day at $1.1185.
Oil prices edged down after rising in the previous session on expectations of an extension to OPEC-led supply cuts.
U.S. crude was down 0.1 per cent on the day at $51.44.
Spot gold edged up slightly to $1,251.09 an ounce.
