Investing.com — Most Asian currencies headed lower on Tuesday, heading for annual losses, as the dollar remained strong heading into 2025, while China’s yuan weakened after data showed the country’s factory activity grew at a slower pace.
It was 0.1% weaker in Asian trading but remained near the two-year high it hit earlier this month. It also ticked lower.
Asian currencies have weakened sharply this year as the Federal Reserve’s interest rate outlook and fears of a possible US-China trade war under Donald Trump’s administration have eroded risk sentiment.
The Fed’s recent signal that there will be fewer cuts in 2025 has given the dollar renewed strength and created downward pressure on the Asian currency.
The Chinese yuan is falling as factory activity grows more slowly than expected
The Chinese yuan’s onshore pair rose 0.2% on Tuesday, while the offshore pair was largely unchanged.
China’s economy grew for a third straight month in December as a series of new stimulus measures continued to provide support, purchasing managers’ index data showed on Tuesday. However, the increase was slightly lower than market expectations and lower than that of the previous month.
Markets are waiting for more clarity on Beijing’s stimulus plans for the coming year. Recent reports have suggested that the country will increase budget spending to support economic growth.
Asian currencies are primed for annual declines
The Japanese yen pair fell 0.3% on Tuesday after hitting a five-month high in the previous session. The yen is expected to lose more than 10% against the US dollar this year.
The Singapore dollar pair remained largely unchanged but headed for a year-on-year increase.
The Australian dollar was slightly lower on Tuesday.
The Indian rupee pair rose 0.1% and was on track to rise more than 3% this year. The rupee has hit a new low against the US dollar this month.
The Thai baht pair rose 0.3%, while the Indonesian rupiah pair gained 0.2% on Tuesday.
The South Korean won is falling amid growing political unrest
The South Korean won pair rose 0.1% on Tuesday. The won weakened almost 6% against the US dollar in December as the country’s martial law failed.
The won is the worst performing currency among its Asian counterparts, falling more than 12% in 2024.
In the latest updates, a South Korean court on Tuesday approved an arrest warrant for President Yoon Suk Yeol, who has been impeached and suspended following his December 3 decision to impose martial law.
The Corruption Investigation Office for High-ranking Officials (CIO) stated that the Seoul Western District Court had granted the injunction requested by investigators probing Yoon’s brief imposition of martial law.