Asian Exchange Drops Against Strong Dollar, China’s Yuan Falls to 17-Year Low Despite PBoC Help By Investing.com
Investing.com– Most Asian currencies fell on Monday as the dollar hovered near a two-year high, while China’s yuan fell to a 17-year low, slipping further after breaking a key psychological level in the previous session.
Comments from US central bank officials over the weekend also weighed on regional currencies. They said the central bank’s efforts to control inflation were not yet complete, but stressed the importance of avoiding damage to the labor market while pursuing that goal.
During Asian trading, the index was lower by 0.1%, but still remained close to the highest two-year level. The dollar has been consistently moving near this level since it reached it last month. A slight decline was also recorded.
China’s yuan has fallen to its lowest level since 2008, even as the PBoC provides support
The mainland Chinese yuan rose 0.5% to 7.3648 yuan on Monday, the highest level since early 2008.
That followed the yuan’s fall above 7.3 to the dollar on Friday, driven by economic challenges and a widening yield gap against the U.S.
To counter fears of further depreciation, the People’s Bank of China (PBOC) reaffirmed its commitment to support the yuan on Monday, setting its daily benchmark rate higher than the critical level of 7.2 per dollar.
The PBOC set the yuan’s middle rate at 7.1876 to the dollar, allowing the currency to trade within a 2% range around this level. This marked a slight boost of 2 pips compared to the previous setup.
December data released on Monday did not provide any support for the yuan, despite posting its fastest growth in seven months.
Markets are awaiting more clarity on Beijing’s plans for stimulus measures in 2025. Recent reports suggest the country will increase fiscal spending to support economic growth, but official figures are still awaited.
The focus this week will be on the key for December, which is likely to affect expectations of more stimulus in the country.
Strong dollar pressure Asia FX; US jobs data, Fed minutes awaited
The dollar continued to put downward pressure on Asian currencies, as global uncertainty over incoming US President Donald Trump and the prospect of rates staying higher for longer supported the greenback.
Markets now await the December 17-18 Federal Reserve meeting on Wednesday and December on Friday.
The Japanese yen fell 0.3% despite data showing the country’s services sector expanded for a second straight month in December, boosted by strong demand and ongoing business expansion.
The Australian dollar rose 0.2%, while the Singapore dollar pair remained largely unchanged.
The Thai baht slipped 0.6%, while the Indian rupee gained 0.1%.
South Korea’s won rose 0.3% on Friday amid the country’s ongoing political crisis.
Protesters took to the streets of South Korea’s capital, Seoul, demanding the arrest of impeached President Yoon Suk Yeol, after he tried to impose martial law in the country.
