Asia FX Rises on Weakening Dollar, Yuan Dips as Zero COVID Persists By


By Ambar Warrick– Asian currencies were modestly higher on Monday, gaining some ground from last week as the dollar declined, although China’s commitment to maintaining its strict zero-COVID policy weighed on the yuan.

The rate fell 0.1% and almost surpassed 7.2 against the dollar after saying the country has no plans to scale back its zero-COVID policy.

The policies, which led to a string of tough lockdowns this year, are at the heart of China’s recent economic slowdown.

The Chinese president’s comments, made during the Chinese Communist Party’s 20th National Congress, also come amid a resurgence of infections in Shanghai.

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But Xi also promised more stimulus measures to support economic growth in the coming months, which contained the yuan’s losses. It rose 0.2% but was trading near lows last seen during the 2008 financial crisis.

Broader Asian currencies benefited from some easing in the , which fell 0.3% on Monday. also declined by a similar margin.

Nonetheless, expectations of strong US interest rate hikes kept sentiment in the region negative as markets priced in a 75 basis point hike by the Fed in November. US inflation, which came in higher than expected last week, had boosted the dollar and caused most Asian currencies to fall sharply.

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The , one of the hardest hit by the dollar’s strength this year, rose 0.1%. But the yen remained close to levels last seen in 1990 as the gap between local and US interest rates widened.

That rose 0.4%, helped by data showing the country filed in September. But the reading was still at its weakest since November 2020 as South Korean factories continue to face headwinds from higher commodity prices.

A slowdown in China, the country’s largest trading partner, has also weighed on South Korea’s economy this year.

Dollar strength, coupled with weaker economic trends in China and other regional markets, has dampened appetite for Asian currencies this year, with several units hitting record lows against the greenback. This trend is likely to continue in the near term as the US Federal Reserve continues to raise interest rates.

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Elsewhere, shares rose 0.6% after British Prime Minister Liz Truss partially scaled back her government’s controversial economic plan. The government will now raise corporate taxes to prop up dwindling public finances.

Focus is also on how the UK bond market will trade after the Bank of England withdrew its support for bond markets on Friday. are currently at an all-time high.


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