📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

Asia FX rattled by rising yields, weak economic data

Published 02/03/2023, 04:16
© Reuters.
USD/JPY
-
USD/THB
-
USD/KRW
-
USD/CNY
-
USD/TWD
-
DX
-
DXY
-
USD/CNH
-

By Ambar Warrick

Investing.com -- Most Asian currencies sank on Thursday as growing fears of a more hawkish Federal Reserve spurred an overnight spike in Treasury yields, while a swathe of weak regional economic data also dented sentiment.

More signs of stubborn inflation in the world’s largest economies drove up concerns that interest rates will remain higher for longer.

This largely offset optimism over a Chinese economic recovery, even as the world’s second-largest economy logged its strongest pace of business activity growth in over a decade.

China’s yuan was among the worst performers for the day, pulling back sharply from a 1% rally in the prior session. Both the yuan and its offshore counterpart lost about 0.4% to the dollar.

Focus this week is also on a meeting of high-level Chinese officials, which could result in broader government policy changes.

Other China-exposed currencies also retreated from recent gains, with the Taiwan dollar and South Korean won losing 0.3% and 0.5%, respectively.

Weak economic readings also painted a bleak picture for broader Asian markets, despite indicators of a strong recovery in China.

South Korean data showed that industrial production in the country slumped more than expected in January from the prior month. But production rose more than expected in January from the prior month, indicating that a bottom may be in sight.

The Japanese yen fell 0.2%, as data showed capital spending in the country remained firm even as business profits slipped in the fourth quarter. But while the reading may indicate some strength in the fourth quarter GDP, it also portends elevated inflation in the near-term.

Among Southeast Asian currencies, the Thai baht slid 0.5% after data showed that the country’s exports slumped far more than expected in January. Thailand’s trade deficit also widened more than expected during the month.

Broader Asian currencies retreated as U.S. manufacturing prices data unexpectedly grew in February, raising concerns that inflation was back on an uptrend in the month. U.S. Treasury yields surged after the reading, with short-term yields scaling 16-year highs on bets that U.S. interest rates will remain higher for longer.

The dollar steadied on Thursday after logging sharp overnight losses against a basket of currencies. The dollar index and dollar index futures rose about 0.1% each, and were still close to near two-month highs.

Rising U.S. interest rates bode poorly for Asian currencies, as the gap between risky and low-risk debt narrows.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.