Asia FX Slammed By China COVID Spike, Russia-Ukraine Woes
Most Asian currencies slumped on Monday, with the yuan hit especially hard as China logged a record jump in daily COVID cases, while the dollar benefited from safe haven demand amid fears of a potential escalation in the Russia-Ukraine conflict. The yuan slid 0.6% to a 10-day low, while its offshore counterpart shed 0.7% as several Chinese cities saw a record spike in new COVID-19 cases. But losses in the currency were somewhat eased by the People’s Bank of China maintaining its key lending rates. Rising infections saw the introduction of new lockdowns in several financial hubs, including the capital Beijing and economic center Shanghai. The new measures drove widespread concerns that economic growth in the country will once again slow to a crawl after a brief recovery in the third quarter. Data released last week showed that the world’s second-largest economy was already struggling in October, heralding more weakness in the coming months as anti-COVID measures intensify. This also largely offset optimism over a potential scaling back of China’s strict zero-COVID policy, which is at the heart of the country’s economic woes this year.
Concerns Over China Rattled Currencies of other Countries.
with heavy trade exposure to Beijing. The South Korean won slid 1%, while the Australian dollar shed 0.3%. The U.S. dollar benefited from renewed safe haven demand amid fears of a Chinese slowdown. The dollar index and dollar futures both rose about 0.3% each, clearing the 107 level and hitting a 10-day high.m Concerns of a potential nuclear crisis in the Russia-Ukraine conflict, amid heavy shelling of Ukraine’s Zaporizhzhia nuclear power plant, also drove safe haven flows into the dollar. The outlook for the dollar was also lifted by hawkish signals from Federal Reserve officials last week. Other Asian currencies retreated as sentiment worsened, with markets fearing that more U.S. interest rate raises could trigger a recession.The Indian rupee sank 0.3%, taking little support from weakening oil prices, while the Thai baht shed 0.5%. The Malaysian ringgit fell 0.4% as the country faces a hung parliament for the first time in history, following a tightly-contested general election. But former Prime Minister Muhyiddin Yassin said on Sunday he secured enough seats to form a government.