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

Chinese Yuan Leads Asia FX Lower as Dollar Hits 20-Year Peak

Published 29/08/2022, 04:40
© Reuters.

By Ambar Warrick 

Investing.com-- China’s yuan led losses across Asian currencies on Monday after weak industrial data, while the U.S. dollar hit a 20-year high on hawkish signals from the Federal Reserve.

The yuan plummeted over 0.6% to 6.9160, hitting its weakest level in 2 years. Data over the weekend showed Chinese industrial profits declined through July, indicating more weakness in the country’s economy. 

But the main source of pressure on the yuan and other regional currencies was hawkish signals from the Fed, which drove the dollar index up 0.4% to its highest level since June 2002. Dollar index futures rose 0.5% and were trading around similar levels. 

Fed Chair Jerome Powell signaled on Friday the central bank had no intention of a dovish pivot, and that interest rates are set to rise steadily. Powell also warned of a potential U.S. economic slowdown.

His warning dented most risk-driven markets, with U.S. stocks posting steep losses on Friday. 

Japan’s yen was also among the worst Asian performers on Monday, losing nearly 0.7%. The yen has been hit especially hard by a growing divergence between local and international interest rates, due to the Bank of Japan’s hesitance to tighten monetary policy. 

Broader Asian currencies slumped between 0.1% and 0.8%, as Powell’s comments drove widespread flows into the dollar. Focus is now on U.S. payrolls data due later this week, which could give the Fed even more space to raise interest rates. 

Over 60% of traders now expect the central bank to hike rates by 75 basis points in its next meeting, pointing to further pressure on Asian currencies. 

Regional units have fallen substantially this year amid rising U.S. interest rates and strength in the dollar. Tightening U.S. monetary policy also limits the amount of cash available for foreign investment. 

Rising oil prices also weighed on most Asian units on Monday, given their dependence on oil imports. 

In the Asia-Pacific region, the Australian dollar fell 0.4%, but trimmed some of its losses after better-than-expected retail sales data for July. 

The Thai baht was the worst performer in Southeast Asia, losing nearly 0.8%.


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.