The yuan dropped to 6.9027 despite the People’s Bank’s (PBOC) stronger midpoint adjustment following a private poll that revealed that Chinese manufacturing output declined in the last month.
The figures confirmed a comparable decrease in a government survey released on August 31, highlighting the burden the COVID-19 lockdowns and an impending power crisis are putting on the economy of China.
To support economic development, the Chinese government has enacted stimulus initiatives, such as interest rate reductions. However, this caused the yuan to drop to a low not seen in two years.
With the spike in COVID-19 cases in Guangzhou and Shenzhen, investors are wary of additional measures that could potentially be imposed.
As the dollar index (DXY) increased roughly 0.3% before crucial US nonfarm payroll figures expected by the end of the week, Asian currencies fell. Payrolls are anticipated to have decreased over the last two months, but signals of labor market robustness may give the Federal Reserve more leeway to raise interest rates in a hawkish manner.
The dollar index futures increased by 0.3%, with most Asian currencies being hurt by the strengthening of the US dollar. The probability that the central bank will increase interest rates by 75 bps later in the month is now over 70%, according to traders.
Given the recent plunge of the yen, it has been a currency of a dismal performance among Asian currencies in 2022, and as the gap in domestic and international interest rates grows, it is anticipated that this trend will continue. The financial crisis in Asia is the last time that a level this low of the Japanese yen has been seen in a while.
Today, won, the South Korean currency, had the worst performance of any Asian currency as statistics revealed that the nation had a record-breaking trade imbalance in the last month.
The Australian dollar fell 0.6% as signs of sluggish industrial development in China suggested that demand for the nation’s exports of raw materials was declining.
According to figures released on September 1, the Australian manufacturing industry expanded less quickly in August than it had in July.