However, investors remained fearful of more declines in the Asian markets due to Jerome Powell’s hawkish remarks, which came amid increased predictions of more interest rate increases by the Federal Reserve.
The Chinese yuan gained 0.2% whereas the Japanese yen increased by 0.3%. Both currencies experienced the poorest performance among Asian currencies during the week, hovering around lows stretching over years.
A string of dismal economic indicators during the previous 2 weeks had an especially negative impact on the Chinese yuan. According to data released on September 9, China’s inflation decreased in the last month as a result of lockdowns related to COVID-19 and a serious energy deficit.
The data also demonstrates that the Chinese government’s economic stimulus programs have not yet had a significant impact on the country’s economic performance.
Data released earlier this week also revealed that, as a result of declining exports and imports, China’s trade balance declined in the month before last. The yuan was expected to decline by 0.7% this week, marking its fourth week of declines in a row.
The hesitation of the Bank of Japan (BoJ) to raise interest rates significantly weakened the value of the Japanese yen. The Japanese economy grew more than was previously anticipated in q2, according to figures released this week, but it is projected to continue to face challenges from inflationary pressures and additional COVID-19 infections.
The yen was forecast to fall 2.4% in the week, marking its fourth straight week of declines.
On September 9, the South Korean won and Singapore dollar both saw increases of 0.6% and 0.4%, correspondingly. The moderate decline in the value of the greenback from its 2-decade highs provided support for the majority of regional units.
A rise in the euro also put pressure on the dollar, which saw losses of 0.6% in both the DXY and DXY futures. The euro increased on September 8 when the European Central Bank (ECB) raised interest rates by a historic 75 bps.
Jerome Powell, the chair of the Fed, stated overnight that the bank will take aggressive action to have inflation under control. Following his remarks, traders started to factor in a probability of more than 85% that September’s rate increase by the Fed will be 75 bps.
The job market is strengthening, as evidenced by declining unemployment claims in the United States, allowing the Federal Reserve more leeway to consider further interest rate hikes.