Asian Currencies Sink Ahead Of Fed

 Asian Currencies Sink Ahead Of Fed

Asian Currencies Sink Ahead Of Fed Meeting; Yuan Bearish On Rate Cut Rumors

During the Monday trading session, most of the Asian currencies were on the back foot due to the trader's preference for the US Dollar. In addition, the upcoming fed meeting has also affected the trader's sentiment as they seek safety in the USD.

Similarly, the Chinese Yuan has also turned bearish as there are growing rumors of a rate cut by China's People's Bank.

Yuan At 6-Month Lows

Overall, the Chinese Yuan lost 0.2% against the US Dollar and touched 7.1451 (a 6-month low). This comes at a time when most of the state-owned Chinese banks have started to introduce rate cuts on CNY deposits.

This move is seen as a signal that the central bank of China will also announce a rate cut later this month. Considering how the economic growth in China is not up to par, the chances of a rate cut have increased manifolds.

The economic rebound in China after COVID-19 has also stalled if we look at the economic data of the past 2 months. Overall, the inflation data and the business activity show dismal results.

If we look around, South Korea's currency also lost around 0.5% on Monday, signaling weakness in the Asian FX markets. Similarly, the Australian Dollar (AUD) was down 0.1%, while the Taiwan Dollar was down 0.4% for the day.

The overall theme in the Asian FX market is of bearish nature as we approach the upcoming Fed meeting scheduled in a few days. For the most part, the Fed is expected to keep its rates steady after going on a rate hike spree for more than a year.

However, any rate cuts or even rate hikes will be considered a surprise and thus will shake the FX markets around the world. In theory, a rate cut at this stage will be dollar bearish, while a rate hike will be dollar bullish.

In addition, the inflation data is also due within a few days before the Fed meeting, which will likely affect the Fed's decision.

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