Investing.com–Most Asian currencies weakened on Monday as the dollar hovered around a two-year high, while the Chinese yuan fell to a 17-year low, falling further after breaking a key psychological level during the previous session.
The US Federal Reserve’s comments over the weekend also weighed on the regional currency. They said the central bank’s efforts to control inflation are not yet complete, but stressed the importance of avoiding damage to the labor market and pursuing that goal.
In Asian trading, the price was 0.1% lower, but still close to a two-year high. The dollar has continuously fluctuated near this level since reaching this level last month. Here too there was a slight decrease.
The Chinese yuan is at its lowest since 2008, even as the PBoC offers support
The Chinese yuan’s onshore pair rose 0.5% to 7.3648 yuan on Monday, its highest level since early 2008.
This follows the yuan’s slide above 7.3 per dollar on Friday, driven by economic challenges and a widening interest rate gap with the US.
To counter fears of further depreciation, the People’s Bank of China (PBOC) on Monday reaffirmed its commitment to supporting the yuan, raising its daily benchmark interest rate above the critical level of 7.2 per dollar.
The PBOC set the yuan’s mid rate at 7.1876 per dollar, allowing the currency to trade within a 2% range around this level. This represented a slight gain of 2 kernels compared to the previous setting.
December figures released on Monday failed to provide any support for the yuan despite recording the fastest growth in seven months.
Markets are eager for more clarity on Beijing’s plans for stimulus in 2025. Recent reports have suggested the country will increase fiscal spending to support economic growth, but are still awaiting official figures.
This week’s focus will be on key words for December, which will likely feed into expectations for more stimulus measures in the country.
Strong Dollar Pressure Asia FX; US jobs data, Fed minutes await
The dollar has continued to put downward pressure on Asian currencies as global uncertainty from incoming US President Donald Trump and prospects of interest rates staying higher for longer have supported the dollar.
Markets now await the Federal Reserve’s December 17-18 meeting on Wednesday and December on Friday.
The Japanese yen pair fell 0.3% despite data showing the country’s services sector grew for a second straight month in December, driven by strong demand and continued business expansion.
The Australian dollar rose 0.2%, while the Singapore dollar pair was largely unchanged.
The Thai baht pair fell 0.6%, while the Indian rupee pair rose 0.1%.
The South Korean won pair rose 0.3% on Friday, amid an ongoing political crisis in the country.
Protesters took to the streets of South Korea’s capital Seoul calling for the arrest of ousted President Yoon Suk Yeol after he tried to impose military law in the country.
