Most Asian currencies went down a little bit on Monday because people were worried that the global economy was getting worse. This kept the dollar close to a 20-year high, while the currencies of Australia and New Zealand went up before their interest rate decisions this week.
Both the Australian dollar and the New Zealand dollar went up by 0.8%. Both countries’ central banks are likely to raise interest rates this week as they try to deal with rising inflation.
At its meeting on Tuesday, the Reserve Bank of Australia is expected to raise rates by at least 50 basis points (bps). On Wednesday, the Reserve Bank of New Zealand is expected to raise rates by the same amount.
Both countries’ central banks have to deal with high inflation because food and fuel prices are going up. Rate increases are also happening because central banks are taking steps to protect their currencies from rising rates around the world.
On Monday, the U.S. dollar index went down a little bit, to about 112.07. This comes after it lost almost 1% last week. But the dollar stayed stuck near its highest level in 20 years, and there was little chance that it would get any weaker before the Federal Reserve raised interest rates again.
This week, all eyes will be on the U.S. nonfarm payrolls data, which is expected to play a role in the Fed’s plans for future rate hikes.
In Asia, the Thai baht and the Indonesian rupiah lost 0.6% and 0.3% of their value, respectively.
The Japanese yen didn’t change much because traders were weighing more signs of a weak economy in the country against government promises that it would act quickly to stop the currency from getting any weaker.
A survey done by the Bank of Japan on Monday showed that business sentiment in Japan got worse than expected in the third quarter. The reading makes it seem less likely that the world’s third-largest economy will get better this year.
Shunichi Suzuki, the country’s finance minister, said on Monday that the government is ready to step in on the currency markets, as it did in September, to stop the yen from falling even more.
This year, the yen has dropped sharply to levels not seen in 24 years. This is because the difference between local and foreign interest rates is getting bigger.
Broader Rising U.S. interest rates are also putting pressure on Asian currencies, and they are likely to continue to lose value until the Fed decides to stop raising rates.
But because China has a week-long holiday this week, Asian trading is likely to be a little less busy than usual.
