Chinese Yuan Tumbles After PBoC Rate Cut, Fed Fears Hit Asia FX

By Ambar Warrick 

Investing.com-- China’s yuan sank further below key levels on Monday after more monetary easing in the country, while broader Asian currencies tumbled in anticipation of a Federal Reserve meeting later this week.

The yuan fell 0.4% to an over two-year low of 7.0080 to the dollar, its second day spent in breach of the psychologically important 7 level. The drop came despite an extremely hawkish midpoint fix by the central bank.

The People’s Bank of China cut a repo rate on Monday, and also increased cash injections into the economy as it sought to boost growth that was severely dented by COVID-related lockdowns. 

The central bank is now struggling to strike a balance between supporting economic growth and stemming further losses in the yuan. A series of strong midpoint fixes by the bank suggest that it is unwilling to let the currency drop any further. 

China’s prospects may improve in the near-term, after the lifting of a two-week COVID lockdown in the megacity Chengdu. Still, the economy has a long road to reach pre-COVID highs. 

Broader Asian currencies sank on Monday, while the dollar index and futures rose around 0.1% each. 

The South Korean won fell 0.4%, while the Malaysian ringgit was the worst performer in Southeast Asia with a 0.3% decline. The Japanese yen fell 0.2%, although a market holiday in the country kept trading volumes slim. 

The Fed is widely expected to raise interest rates by 75 basis points bps on Wednesday. Traders are also pricing in the possibility of a 100 bps hike, after hotter-than-expected U.S. inflation data last week. 

“High inflation means 100bp is a risk, but inflation expectations and corporate price plans look less threatening, and the growth outlook is more uncertain, so we don’t see it. Still, a more hawkish message surrounding sticky inflation will see the Fed dots closer reflect the market pricing of a 4.25-4.5% terminal rate,” ING analysts wrote in a note. 

In the Asia-Pacific region, the New Zealand dollar sank 0.5% to an over two-year low. Reserve Bank Governor Adrian Orr said the bank plans to include climate change risks in how it manages monetary policy.

Begin trading today! Create an account by completing our form

Privacy Notice

At One Financial Markets we are committed to safeguarding your privacy.

Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.

Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.

Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.

By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.3% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Back to top

Office network

One Financial Markets is the trading name of Axi Financial Services (UK) Ltd, a company registered in England with company number 6050593. Axi Financial Services (UK) Ltd is authorised and regulated by the Financial Conduct Authority in the UK (under firm reference number 466201) and the Financial Sector Conduct Authority in South Africa (with FSP number 45784).

The information on this site is not directed at residents of the United States, Belgium, Poland or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

www.onefinancialmarkets.com is owned and operated by Axi Financial Services (UK) Ltd.

Award winning broker
We have been presented with a number of awards that recognise the quality of our service and dedication to our clients :

Best FSA Regulated Broker
Saudi Money Expo

Best Education Product
Saudi Money Expo

Best Broker - Online Trading
IAIR Awards

Best Institutional Broker
Saudi Money Expo

Best FX Services Broker
CN Forex

Top International
FX Broker 2015

Saudi Money Expo

Broker of the Year
Online Trading – Middle East

IAIR Awards

Best Forex
Customer Service 2018

JFEX Awards

We accept the following payment methods: