Asia FX dips on Fed concerns, Chinese yuan sees intervention support

investing.com:

Investing.com-- Most Asian currencies fell on Thursday after the minutes of the Federal Reserve’s July meeting presented a hawkish outlook on interest rates, while the Chinese yuan rose amid reports of currency market intervention by the state.

The dollar strengthened against a basket of currencies after the Fed minutes, coming within sight of an over two-month high as traders bet that U.S. interest rates will remain higher for longer, or even potentially rise further this year.

This notion pressured most Asian currencies, as the gap between risky and low-risk yields narrowed. The Japanese yen was among the worst hit, hovering at a nine-month low on Thursday.

Data also showed that Japan logged a surprise trade deficit in July, while the country’s exports, particularly to China, contracted for the first time since 2021.

Weak trade data also weighed on the Singapore dollar, with the currency losing 0.2% after the island state’s key non-oil exports shrank more than expected in July. 

Singapore’s trade activity acts as a bellwether for broader Asia, and heralds continued weakness due to slowing demand in China. 

The Australian dollar slid 0.6%, hitting a nine-month low on risks from a Chinese slowdown. Data also showed some cooling in Australia’s job market through July, which gives the Reserve Bank less impetus to keep raising interest rates. 

The yuan was among the few outliers for the day, surging 0.7% from its weakest level since November 2022. 

Reuters reported that China’s major state-owned banks were seen selling U.S. dollars to snap up yuan in both onshore and offshore spot markets this week, with the measures aimed chiefly at buoying the Chinese currency.

The yuan was nursing steep losses for August as a string of