Chinese Yuan Leads Asia FX Losses on Sanctions Report, U.S. CPI Woes

Chinese Yuan Leads Asia FX Losses on Sanctions Report, U.S. CPI Woes
Chinese Yuan Leads Asia FX Losses on Sanctions Report, U.S. CPI Woes
© Reuters

By Ambar Warrick– China’s yuan fell the most among Asian currencies on Wednesday following a report that the U.S. was considering sanctions against Beijing to deter an invasion of Taiwan, with regional units also pressured by higher-than-expected U.S. inflation data.

The sank 0.7%, coming close to a two-year low, while most other Asian currencies were pressured by a stronger dollar and growing expectations of more sharp monetary policy tightening by the Federal Reserve.

The also shed 0.7%.

A suggested that the U.S. was considering sanctions against China to deter it from invading Taiwan, with Taipei also pressuring the European Union to do the same.

While the discussions are still at an early stage, any new sanctions against China threaten to severely dent relations between Beijing and the West.

Sanctions against China would also be devastating for global trade, given the country’s key role in the supply chain for several industries. Tensions between the U.S. and China are already heightened this year after several U.S. diplomats visited Taiwan, which Beijing claims is part of its territory.

Broader Asian currencies retreated as the dollar surged to near 20-year peaks after the U.S. inflation reading. showed that U.S. inflation is not cooling as quickly as initially thought, putting more pressure on the Fed to keep hiking interest rates.

Both the and traded sideways on Wednesday, after stellar gains in the prior session.

The was among the worst hit by the inflation reading, slumping over 1% on Tuesday and coming close to 24-year lows. The currency is among the worst-performing Asian units this year due to a growing rift in interest rates.

While Japanese ministers have said they will look to curb the yen’s losses, no clear measures have been undertaken so far.

Asian currencies have fallen sharply this year as a series of interest rate hikes by the Fed drove capital away from risk-driven markets.

Investors are now pricing in a that the Fed will raise rates by 75 basis points again next week.

Leave a Reply

Your email address will not be published. Required fields are marked *

New Brokers
2.8 rating
Buy & sell Crypto in minutes
3.0 rating
Note: Investing involves risks. You can lose your deposit. We advise you to only invest in financial products which match your knowledge and experience.
2.0 rating
Interactive Brokers attracts active traders with low per-share pricing, an advanced trading platform.
4.3 rating
eToro is the world’s leading social trading platform, with thousands of options for traders and investors.
Risk Warning: The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory or other services by AdonFinance. In addition, the content of the website offers no opinion with respect to the suitability of any security or any specific investment. Trading foreign exchange, stocks, cryptocurrencies and commodities is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against traders. Before any investment with any broker you need to carefully consider your targets, previous experience, and risk level. Forex trading can result in the loss of your money, as a result, you are expressly cautioned that you should never invest or trade with money that you cannot afford to lose. For the avoidance of doubt, AdonFinance's service provides Brokers reviews in the Financial market. AdonFinance, its subsidiaries, agents or affiliates will assume no responsibility whatsoever for your trading activity. © Copyright 2021 AdonFinance