© Reuters.
Investing.com – Most Asian currencies fell on Tuesday as disappointing Chinese economic data tipped a weak outlook for the region’s largest economy, while upbeat comments from Federal Reserve officials added uncertainty about the path of US interest rates.
It fell 0.1% and traded near a two-month low after data showed lower-than-expected growth in April. The readings, which came on the heels of several weak economic indicators earlier this month, point to a stunning recovery in Asia’s largest economy, even after the country eased most anti-COVID measures earlier this year.
The weak data also saw markets prepare for a possible 25 basis point interest rate cut by the People’s Bank next month, which is likely to lead to further weakness in the yuan. The currency was trading just shy of a psychologically important level 7 against the dollar.
Weakness in China has spilled over into other Asian currency markets, particularly those with high trade exposure to the country. It fell 0.1%, while losses were led across Southeast Asia with a 0.3% drop, as traders also recently cashed in on profits in the currency.
The index fell 0.1 percent, also affected by pressure from a sharp decline in the face of rising interest rates and deteriorating economic conditions.
Sentiment towards risk assets was also shaken by a slew of Fed officials who warned that the Fed could still do more to bring down stubborn inflation. He said in separate speeches that interest rates are likely to stay high for longer, with some officials also raising the prospect of a rate hike.
The pair settled near its highest level in a month on Tuesday, after posting small losses in the previous session. But the greenback is still strong against the greenback by about 0.1%.
The dollar has moved slightly this week as markets have been heading lower in anticipation of more US economic signs this week, starting with and due later in the day.
Several other Fed speakers are also lining up this week, most notably on Friday.
It showed that markets are still in a position to pause in the Fed rate hike cycle in June. But traders are also taking into account a small chance of a 25 basis point increase.
The prospect of US interest rates staying elevated for longer bodes weaker for Asian currencies, as the gap between risky and low-risk returns narrows.
