Market Analytics and Technical Considerations
Key Points
On Monday, fears of a slowdown in China’s economy stoked demand for safe havens, while the dollar rose as China’s civil unrest grew worse and its strict anti-COVID policy shook sentiment.
The offshore yuan fell by 0.2% while the Chinese yuan fell by 0.4% to 7.1997 against the dollar, trading at a level that was lower than two weeks ago. Although initial losses were reduced for both currencies, their prospects remained dim.
Over the weekend, protesters from China clashed with police in a number of major cities as public outrage over the government’s stringent COVID measures grew. A deadly fire in Ürümqi was caused by lockdown measures, which sparked a nationwide uprising.
China’s economic growth is already struggling as a result of the country’s stringent COVID measures this year, so the unrest may now hinder growth. China is also dealing with an unprecedented rise in the number of COVID-19 cases per day.
The currencies of nations that have a lot of trade with China did poorly. The South Korean won and the Taiwan dollar both lost 0.2%.
The Australian dollar also suffered as a result of weaker-than-anticipated retail sales data.
In response to rising demand for the greenback as a safe haven, the U.S. dollar index and dollar futures both recovered from recent losses to reach over 106.On Monday, worries about rising Chinese demand sent commodity prices plummeting around the world.
However, rising expectations that the Federal Reserve will reduce the amount of time it takes to raise interest rates in the coming months held back dollar gains. Asian currencies have benefited from this scenario, which has resulted in substantial gains over the past two weeks.
However, given that inflation is still well above the Fed’s target, markets are still unsure of when interest rates in the United States will peak. Gains in Asian currencies may be constrained in the near future by this sentiment.
The Japanese yen rose 0.4% on Monday, outperforming other Asian currencies thanks to a combination of bargain buying and demand for safe havens.
Some people think that the Bank of Japan will be forced to tighten its ultra-loose monetary policy because of recent economic weakness.
The Thai baht lost 0.3 percent in Southeast Asia after data showed that the country’s exports and imports fell unexpectedly in October. However, the trade deficit of the nation also decreased significantly.
