© Reuters.
Investing.com – Most Asian currencies moved slightly on Thursday and the dollar rose to a seven-week high on optimism about a US debt limit hike and the expectation of more signals about monetary policy.
A major farrier was the Chinese yuan, which reached its lowest level in more than five months amid growing concerns that the country’s economic recovery is slowing.
It fell 0.1%, crossing the psychologically important level of 7 against the dollar for the first time since early December. A breakout of Level 7, which is closely watched by the government and traders, usually portends further losses for the Chinese currency.
A series of weaker-than-expected economic readings for April indicated a slowing recovery in the country, despite the lifting of anti-COVID measures earlier in the year. Markets are also beginning to speculate that the People’s Bank of China may cut interest rates to support the economy, which does not bode well for the yuan.
which had breached level 7 earlier this week, was down 0.3%.
Broader Asian currencies moved in a flat to lower range, pressured by a strong dollar as the Biden administration said an agreement on raising the debt limit could be reached as soon as this week.
The move eased concerns about a US debt default, and prompted capital inflows into dollars and Treasuries.
The index rose 0.1% after heavy losses overnight, while the pair moved and rallied less than 0.1% in either direction.
The yen got some support from data showing Japan fell more than expected in April. But the drop in Japanese signaled more economic headwinds for the country, especially amid sluggish demand in key export markets.
It fell 0.2%, also indicating less economic margin for the Reserve Bank to continue raising interest rates.
WOT settled in Asian trade after rising to a seven-week high in overnight trade.
Markets are now awaiting a slew of Fed speakers this week, most notably on Friday, for more clues about monetary policy.
Fed officials presented a hawkish view on monetary policy earlier this week, with a general consensus among policymakers that inflation remains too high, and that the Fed could still raise interest rates further.
This was contrary to market expectations that the Fed would pause interest rates in June, as. But as US interest rates continue to rise for a longer period, Asian currencies are likely to face increasing pressure in the coming months.
