The yuan fell to 6.9160, reaching its lowest point since 2020. Data released before today revealed a fall in industrial earnings in China through last month, pointing to further economic weakening in the nation.
However, hawkish Fed indications were the primary factor pressuring the yuan and other local currencies, pushing the DXY Index up to its peak point since June 20 years ago by 0.4%. Futures of the DXY index increased 0.5% and were changing hands at comparable ranges.
On August 26, Jerome Powell, the chair of the Federal Reserve indicated 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.
Most risk-taking markets were hurt by his caution, and US stocks suffered significant losses last week.
The Japanese yen had one of the worst days across Asian currencies on August 29, falling roughly 0.7%. Because of the Bank of Japan’s hesitation to tighten monetary policy, a rising difference among domestic and foreign interest rates has had a particularly negative impact on the native currency.
Asian currencies fell from a range of 0.1% to 0.8% as a result of the remarks of the Fed Chair in Wyoming, which encouraged massive dollar movements. The US payroll report, which is anticipated later this week and may allow the Fed additional leeway to hike interest rates, is currently the main focus.
There will likely be more stress on Asian currencies because more than 60% of traders now anticipate the central bank will increase rates by 75 bps at its upcoming meeting.
Regional units have decreased significantly in 2022 as a result of the soaring greenback and higher interest rates in the US. The amount of money ready for foreign investment is also lowered as a result of tighter US monetary policy.