Through Ambar Warrick,
China’s currency, the yuan, was the worst performer among Asian currencies on Monday. This happened as the U.S. dollar hit a 20-year high thanks to hawkish signs from the Federal Reserve.
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The yuan fell more than 0.6% to 6.9160, reaching its lowest point in two years. China’s industrial profits dropped in July, according to data that came out over the weekend. This means that China’s economy is getting worse.
However, hawkish Fed signals were the primary factor pressuring the yuan and other local currencies, pushing the dollar index up 0.4% to its highest level since June 2002. Futures for the dollar index increased 0.5% and were trading at comparable levels.
On Friday, Fed Chair Jerome Powell said a dovish tilt was not in the cards for the institution and that interest rates would continue to increase slowly. Powell also foresaw a probable decline in the American economy.
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Most risk-taking markets were hurt by his warning, and U.S. stocks suffered significant losses on Friday.
The Japanese yen had one of the worst days among Asian currencies on Monday, falling roughly 0.7%. Because the Bank of Japan has been slow to tighten monetary policy, the growing difference between domestic and international interest rates has hurt the yen.
Broader Asian currencies fell between 0.1% and 0.8% as a result of Powell’s remarks, which encouraged massive dollar flows. The most important thing right now is the US payroll report, which is expected later this week and could give the Fed more room to raise interest rates.
More pressure will probably be put on Asian currencies because more than 60% of traders now think that the central bank will raise rates by 75 basis points at its next meeting.
Regional unit sales have decreased significantly this year as a result of rising U.S. interest rates and a strong dollar. The amount of money available for foreign investment is also lower as a result of tighter US monetary policy.
Related: Asian Currencies: The Chinese Yuan Drops Nearly 2 Years
Since most Asian companies depend on oil imports, rising oil prices hurt most of them on Monday as well.
In the Asia-Pacific area, the Australian dollar fell by 0.4%, but after better-than-expected retail sales numbers for July, it gained some ground.
With a loss of about 0.8%, the Thai baht had the poorest performance in Southeast Asia.
