Chinese Yuan Continues to Fall – New Zealand Dollar Benefits on Orr Statement By Investing.com

by Ambar Warrick

Investing.com – Most Asian currencies rose somewhat on Tuesday morning as the US dollar paused trading below 20-year highs. Meanwhile, the Chinese yuan fell to a new two-year low in light of more signs of economic weakness in the Middle Kingdom.

They each rose 0.3% while they rose 0.2%. The Asia Pacific region was the best performer, up 0.7% after Central Bank Governor Adrian Orr said the bank is likely to tighten more this year.

Asian markets also stabilized with the dollar consolidating, having risen sharply over the past seven sessions and consolidating below a 20-year high in the past few hours. It fell 0.4% to 113.71, while it was down 0.3%.

The dollar’s consolidation also allowed currencies other than Asia to recover. It is up 0.9% from yesterday’s record low, which was up 0.4%, recovering from a 22-year low.

However, sentiment remains tense over the potential for further gains in the dollar and US Treasury yields amid growing fears of a global recession. Last week’s series of weak economic data weighed on all asset classes, prompting the dollar to emerge as a safe haven.

The prospect of further US interest rate hikes will likely continue to weigh on Asian currencies. Asian currencies have depreciated this year after a series of sharp interest rate increases by the US Federal Reserve.

The US Federal Reserve recently indicated that the key interest rate will be well above 4% by the end of the year.

It was among the few losers today, falling 0.2% and reaching a two-year low (7.1699). The reason for the yuan’s losses came on the back of recent data showing that profits of Chinese industrial companies fell for the second month in a row in August. This was due to the ongoing disruption from COVID-related lockdowns.

The weak yuan has also weighed on Chinese manufacturing activity as it makes imports of goods more expensive.

The slowdown in China’s economy this year has also weighed on sentiment towards Asia, given the country’s position as a major trading hub for the region.

However, with the lifting of COVID restrictions and new government stimulus measures, growth in the country could pick up again later in the year.