© Reuters.
Investing.com – Most Asian currencies fell on Monday, tracking weak economic signals from China, while the dollar steadied as markets continued to speculate on the path of US interest rates.
GDP data from China confirmed that the recovery in Asia’s largest economy is starting to lose steam, a trend that could attract more stimulus measures from Beijing.
But he also pointed to the near-term weakness in the Asian economy, which in turn prompted investors to take profits from the recent strength in regional currencies. Volumes were also somewhat subdued due to the Japanese market holiday.
The pair stabilized in Asian trade after heavy losses last week, and returned towards the 100 level.
Data released on Friday showed that the United States remained resilient through June, adding to concerns that the trend could keep inflation flat and the Federal Reserve to be optimistic.
However, the largely lower-than-expected readings left markets questioning how far the Fed will continue to raise interest rates.
The Chinese Yuan is slipping amid weak GDP
It was among the worst performers for the day, down 0.4% after data showed that Chinese economic growth slowed during the second quarter.
It grew only 0.8% in the second quarter than the first, growth over the same period last year.
The readings showed that China was struggling to maintain the strong economic momentum seen in the first quarter, and that the government was likely to roll out more stimulus measures to support growth in the coming months. This is likely to affect the yuan.
But the People’s Bank of China kept medium-term lending rates steady on Monday, and is likely to herald a similar move to the loan prime rate (LPR) later this week. The bank had trimmed its LPR in June to spur growth.
Concerns about China spilled over into other currencies, as the dollar, which has significant trade exposure to China, fell 0.4%. It sank 0.6%, while losses were led across Southeast Asia, down 0.6%.
It was flat in foreign trade.
Federal Reserve, interest rate hikes remain in focus
Most Asian currencies settled on solid gains from the previous week, while the dollar neared a 15-month low after a weaker-than-expected US inflation reading for June.
The reading spurred bets that the Fed was close to peaking interest rates, and that its widely expected hike in late July would be the last central bank hike of the year.
But even if the Fed pauses after July, gains in Asian currencies are expected to remain limited, given the United States.
