Asian Currencies are taking A Hit Against the US Dollar
- Shams ul Zoha
- August 21, 2022
- 9:22 am
WHAT YOU SHOULD KNOW
- Asian currencies have fallen due to worries about China’s slowing economic development
- The US index rose 0.2% on Friday, indicating that the dollar was gaining value against those other currencies.
China’s currency, the yuan, fell to nearly a two-year low on Friday versus the US dollar. Asian currencies have fallen due to worries about China’s slowing economic development and remarks from the US Federal Reserve about boosting interest rates.
The yuan dropped as much as 0.4 percent, reaching its lowest point since September 2020 at 6.8144 to the dollar. China’s disappointing growth results come after a warning about the nation’s troubled real estate sector.
There are concerns that the United States and China will have increased tensions because Washington and Taiwan began negotiations over a trade agreement. This has caused the yuan and other Asian currencies to come under pressure.
Most of the major Asian currencies have declines of 0.1 to 0.5 percent.
The Federal Reserve could raise interest rates by as much as 75 basis points in September. This is due to the 40-year high inflation, even though it has slightly decreased in July.
In short, rising interest rates in the United States have caused many Asian currencies to lose value compared to the US dollar. This happens because when interest rates are higher in the US, it becomes more attractive for investors to put their money into US assets rather than in Asia. This shift of capital away from Asia causes the value of Asian currencies to go down.
The US index rose 0.2% on Friday, indicating that the dollar was gaining value against those other currencies.
Inflation reached a more than seven-year high in July, according to data, which caused the Japanese yen to decline by 0.4% against the dollar. Despite intensifying pricing pressures, the Bank of Japan has stated that it has no intentions to curtail its ultra-loose monetary policy this year.
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