Most Asian currencies strengthened on Thursday, while the dollar extended steep overnight losses as a warning on economic growth and a potential banking crisis spurred growing bets that the Federal Reserve was done hiking interest rates.

While the Fed hiked rates by 25 basis points as expected on Wednesday, comments from Chair Jerome Powell offered a less hawkish outlook on monetary policy, with the bank now adopting a more data-dependent approach to hiking rates.

Powell also warned that U.S. economic growth was cooling and that U.S. banks were set for tighter credit conditions.

The dollar tumbled after the Fed decision, and extended losses into Thursday. The dollar index and dollar index futures fell nearly 0.3% each, and were close to their lowest levels this year.

Treasury yields also fell as Fed Fund futures prices showed that markets were pricing in a 92% chance that the Fed will hold rates steady in June, according to CME Group’s FedWatch tool.

Asian currencies regained some lost ground on that notion, with the Japanese yen up 0.1%. The currency was also boosted by growing safe haven demand as markets fretted over worsening economic conditions this year.

The rate-sensitive South Korean won was the best performer for the day, up 0.9% as it recovered from a recent five-month low, while the Australian dollar rose 0.4% as strong retail sales and trade balance data pointed to more economic headroom for the Reserve Bank to keep raising interest rates.

The Chinese yuan added 0.2% as it resumed trade after the “Golden Week” holiday. Recent data showed that consumer spending and travel demand shot up during the holiday after the lifting of most anti-COVID measures earlier this year.

But other data furthered the notion of an uneven economic recovery in China. A private survey showed on Thursday that Chinese manufacturing activity unexpectedly shrank in April, as a post-COVID rebound ran out of steam.

Broader Asian currencies also crept higher on Thursday. The Indian rupee added 0.1%, while the Thai baht led gains across Southeast Asia with a 0.3% rise.

But while a potential pause in the Fed’s rate hike cycle bodes well for regional currencies, any major upside is likely to be quelled by worsening economic conditions across the globe.

Fears of a recession are likely to keep traders wary of any risk-driven assets, while also pushing capital towards safe havens such as gold.