© Reuters
By Ambar Warrick
Investing.com-- Most Asian currencies fell on Tuesday, albeit at a slower pace than before as pressure from the dollar eased, although concerns over rising U.S. interest rates kept markets subdued.
China’s yuan fell 0.1%, hovering around two-year lows as traders continued to fret over slowing economic growth in the country.
COVID-19 lockdowns, a debt-saddled real estate market and drought-driven power shortages have severely dented Chinese economic activity this year, which in turn has weighed on the yuan.
Focus is now on upcoming PMI data for July, due on Wednesday. The manufacturing sector is expected to have shrunk for a second straight month, reflecting poor operating conditions.
Broader Asian currencies were still reeling from hawkish signals from the Federal Reserve, which spurred sharp losses across most markets, and supported the dollar. Fed Chair Jerome Powell had last week signalled the bank has no intention of easing its pace of aggressive interest rate hikes this year.
But the dollar retreated slightly from a 20-year high, weakening against the euro as investors bet that the European Central Bank would aggressively tighten policy in 2022.
The dollar index and dollar index futures were flat on Tuesday, after losing over 0.4% each in the prior session.
Among Asian currencies, the Singapore dollar fell 0.1%, while the South Korean won lost 0.2%. South Korea’s newly-elected government said it will cut government spending for the first time in 13 years as part of the 2023 annual budget.
The move comes as the country grapples with rampant inflation- a result of pandemic-era monetary stimulus and rising commodity prices. This has also seen the South Korean central bank hike rates steadily this year.
The Australian dollar fell 0.3%, as building approvals data came in significantly worse than expected for June. Approvals plummeted by 17.2% in the month, compared to expectations of a 5% drop.
The reading reflects the steadily deteriorating conditions in Australia's housing market, due to rising interest rates and stagnant wages.
The Japanese yen was among the few outliers in Asian currencies on Tuesday, rising 0.1% as data showed the country’s unemployment rate remained steady through July, despite a rising number of economic headwinds.
