⏳ Final hours! Save up to 60% OFF InvestingProCLAIM SALE

Chinese Yuan Sinks on Power Shortage Concerns, Asian FX Dips

Published 24/08/2022, 04:28
© Reuters.
USD/JPY
-
USD/SGD
-
USD/CNY
-
USD/TWD
-
DX
-
DXY
-

By Ambar Warrick 

Investing.com-- China’s yuan fell on Wednesday amid concerns that a power shortage in Sichuan could further dent industrial activity, while fears of a hawkish Federal Reserve weighed on broader Asian currencies. 

The yuan fell 0.4% to 6.8612, coming close to a two-year low against the dollar. Reports of potential power cuts in industrial hub Shanghai weighed on the currency, as investors feared more headwinds to manufacturing activity after a series of COVID lockdowns this year. 

The country is facing a severe heatwave, which has dried up some of its riverbeds and impacted regions dependent on hydroelectric power. Factories operated by Toyota Motors and Contemporary Amperex Technology Co in the Sichuan province were shut last week amid a power crunch. 

The government has also announced power saving measures in other major cities including Beijing and Chongqing. 

Still, the power shortage appears to be largely seasonal, and could improve with the passing of Summer. 

But the power crunch comes at a time when the Chinese economy is already reeling from COVID-related shutdowns. Further headwinds to the industrial sector, which is already in contraction territory, could stall a recovery. 

Most other Asian currencies retreated on Wednesday, while the dollar curbed recent losses after Minneapolis Fed President Neel Kashkari said the central bank is likely to keep tightening policy at a sharp pace until inflation is reined in. 

The Japanese yen fell 0.1%, while the Singapore dollar and Taiwan dollar lost 0.2% each. 

The U.S. dollar index rose after Kashkari’s comments, recouping some of Tuesday’s losses. A swathe of weak economic indicators had dented the greenback in the prior session.

Dollar index futures also rose slightly. Kashkari's comments echo hawkish stances from several other Fed members, which has drummed up expectations that the Fed will stick to its pace of interest rate hikes this year. 

Focus now turns to Fed Chairman Jerome Powell’s address to the Jackson Hole Symposium this Friday, where the central banker is expected to provide more cues on the Fed’s plan to tighten monetary policy

 

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.