Market Analytics and Considerations
Key Notes
On Monday, the majority of Asian currencies surged, with the Chinese yuan reaching a 4 top after the country opened its country boundaries. The greenback also sank as expectations for less aggressive language from the Federal Reserve impacted on the greenback and boosted regional currencies.
Following China’s opening of its frontiers to international travel on Sunday, the yuan increased 0.7% to 6.7912 against the dollar, its highest since late August. The change is the sharpest departure from the nation’s stringent zero-COVID strategy, which has harmed economic growth over the past 3 years.
As investors placed bets on a potential economic revival following the resumption, the offshore yuan also increased by 0.5%.
Nevertheless, investors continued to approach China with prudence considering that the nation is currently experiencing the worst COVID-19 epidemic to conditions ensuring the relaxation of most anti-COVID measures in December. Market volatility in the near future as a result of this might potentially postpone an economic recovery, according to economists. Latest economic statistics from China showed a gloomy future for the nation.
However, currencies of nations with significant trade exposure to China also experienced significant advances on Monday. The Philippine peso increased by 0.7%, the Taiwan dollar up 0.3%, and the South Korean won at 0.7%. Australian dollars increased by 0.7%.
Wider After figures on Friday revealed more softening in the U.S. labor market, the dollar’s drop helped Asian currencies as well. The result reduced certain fears that a stubbornly robust job market will support inflation and raised expectations that the Treasury Department will not feel as pressured to maintain higher rates of interest for as long.
The Thai baht was the star performer in Southeast Asia, rising by 0.8%, whereas the Japanese yen increased by 0.5percentage points during the holiday trading period.
The dollar index and dollar index futures both dipped by 0.3%, extending their Friday deficits. The weak jobs report caused the dollar to have a subdued beginning to the new year.
The U.S. consumer price index inflation numbers, which seem to be due this Thursday, are currently the primary emphasis. The report is anticipated to reveal that inflation declined even more in December, which will probably call for less aggressive action but by Fed.
However, the Fed recently issued a warning that it might maintain interest rates higher for longer considering that inflation is still running substantially beyond its target zone.
