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Chinese yuan dips on COVID chaos, SE Asia FX outperforms

Forex Nov 24, 2022 11:07PM ET
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By Ambar Warrick 

Investing.com-- Most Asian currencies fell on Friday as concerns over worsening COVID-19 conditions in China dented sentiment, although several regional units were still set for a stronger week as signals on smaller interest rate hikes by the Federal Reserve weighed on the dollar. 

Southeast Asian currencies outperformed their broader peers this week, as the prospect of a less hawkish Fed saw investors piling into high-yielding, risk-heavy assets. The Philippine peso added 0.8% this week, while the Thai baht jumped 0.7%. 

The Malaysian ringgit rose 0.7% on Friday and was the best performer this week with a 2% spike after the country ended five days of political deadlock by naming a new Prime Minister. 

The Chinese yuan fell 0.1%, and was among the worst-performing Asian currencies this week, down 0.6%. Asia’s largest economy is struggling with a record-high jump in daily COVID-19 cases, which saw the reintroduction of strict curbs in several major cities and also sparked public unrest in "iPhone City" Zhengzhou. 

The currencies of countries with high trade exposure to China logged small moves on Friday. The Australian dollar rose 0.1%, but was set for a 1.5% weekly loss due to concerns over the country's largest trading partner. 

Weakness in the U.S. dollar kept most other Asian currencies on track with weekly gains. The dollar index fell 0.2% in holiday-thinned trade, while dollar index futures steadied around 105.750.

But the greenback was set to lose 1% this week after the minutes of the Federal Reserve’s November meeting indicated that the central bank was considering a slower pace of interest rate hikes in the coming months.

Several Fed members supported smaller rate hikes to gauge the economic impact of a sharp rise in interest rates this year. Markets broadly expect the bank to hike by 50 basis points in December, although later hikes will likely be determined by the trajectory of U.S. inflation

Smaller U.S. rate hikes are positive for Asian currencies, as they give regional central banks more room to tighten policy and match pace with the Fed. But markets still remain uncertain over when U.S. interest rates will peak. 

The Japanese yen fell 0.1% on Friday after data showed inflation in Tokyo reached a 40-year high in November, heralding more inflationary pressures for the country. But the yen was set to rise over 1% this week, as dovish signals from the Fed helped the currency recover further from multi-decade lows.

Chinese yuan dips on COVID chaos, SE Asia FX outperforms
 

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Comments (1)
Shadat Hossen
Shadat Hossen Nov 25, 2022 4:02AM ET
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There is no worst nation like Chinese in the world. Without China, there is currently no Covid in the rest of world !!
Brad Albright
Brad Albright Nov 25, 2022 4:02AM ET
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Your nation is no shining example if it produces people who think like you.
Tyrone Jackson
Tyrone Jackson Nov 25, 2022 4:02AM ET
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But Brad - he has a point- most nations are no longer struggling with Covid- Yet China is struggling very much with Covid- WHY? And then there is the factories in China that have locked up the workers. Then cannot leave the campus. They can not go home. And they did not pay them the amount they said they would. That is slavery. China has SLAVE LABOR BUILDING IPHONES. How do you dispute that?? It’s all over the internet news You can here to tear him down and his country- You sir are far far worse human being. You are a sick man Brad
Brad Albright
Brad Albright Nov 25, 2022 4:02AM ET
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Tyrone Jackson Me sick? That's not what ur sizter says.
 
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