Asian currencies came under further
pressure on Friday, as the yuan weakened below the threshold of
7 per dollar, while increased Federal Reserve rate hike
expectations boosted U.S. Treasury yields and kept dollar demand
The yuan had fallen below 7 per dollar
only twice since the global financial crisis of 2008, and its
crossing of the level could now stoke fear of capital outflows.
But several state media outlets published commentaries that
sought to stabilize market expectations and played down any
significance of the level.
“We are in a very strong dollar environment, which is very
hard to go against, and so (the People’s Bank of China) won’t be
looking to defend any particular level rigorously…. It’s
really all about managing the pace of the moves.” said Khoon
Goh, head of Asia research at ANZ.
The Taiwanese dollar slipped to its lowest level
since September 2019, while the South Korean won hit
yet another 13-1/2 year low. Thailand’s baht slid to
levels not seen since December 2006.
“So long as (the yuan) remains weak, you’re quite likely to
see Asian underperformance in aggregate,” said Galvin Chia,
emerging markets strategist at NatWest Markets,
He expects the weakness to be centered around such currencies
as the South Korean won, Taiwan dollar and Malaysian ringgit
trading against the dollar.
Markets in Malaysia were closed for a holiday.
The won, the worst performing emerging-market
currency in Asia this year, fell 0.2% and was on course for its
sixth straight week of losses against the dollar.
Reported dollar-selling activity and verbal warnings from
the country’s foreign exchange authority on Thursday appeared to
provide temporary relief for the won. But analysts have warned
that defending currency levels is very costly and, if
unilateral, unlikely to be effective.
The Japanese yen rose slightly, helped slightly by
hopes of a potential currency intervention.
Shares in Asia were also weaker, with stocks in Indonesia
leading the fall just a day after hitting record highs.
Equities in Jakarta, Taipei, Seoul and
Bangkok dropped by between 0.4% and 1.5%.
Shares in Shanghai fell more than 1% to their lowest
in six weeks, even as data showed China’s economy had been
surprisingly resilient in August. Faster than expected growth in
factory output and retail sales shored up the recovery from the
effects of COVID.
But in contrast to the upbeat activity data, China’s
property sector contracted further. Home prices, investment and
sales extended losses.
U.S. two-year Treasury yields hit a fresh 15-year
high overnight, after data on retail sales and jobless claims
showed a resilient economy that gives the Federal Reserve ample
room to aggressively hike interest rates next week.
** China’s economy perks up but property crisis worsens
** Taiwanese dollar at lowest level since Sept, 2019
** Yield on Indonesia’s benchmark 10-year note
hits one-week high
** Indonesia books $5.76 bln trade surplus in Aug, above
Asia stock indexes and currencies at 0355 GMT
COUNTRY FX RIC FX FX YTD INDEX STOCK STOCKS
DAILY % S YTD %
Japan +0.09 -19.74 -1.02 -4.17
China -0.21 -9.36 -0.96 -12.93
India -0.14 -6.86 -0.45 2.55
Indonesia -0.22 -4.54 -1.47 9.37
Malaysia – -8.14 – -6.39
Philippines – -11.09 -0.21 -7.87
S.Korea -0.17 -14.85 -0.97 -20.12
Singapore +0.00 -4.24 -0.05 4.57
Taiwan -0.50 -11.50 -0.96 -20.26
Thailand -0.12 -9.72 -0.41 -1.33
(Reporting by Harish Sridharan in Bengaluru; Editing by Bradley