SINGAPORE: From Covid risks to talk of a reduction in US stimulus, there’s been no shortage of bad news for Asian currencies. An upcoming report on China’s manufacturing sector may add to the pressure.
Traders are looking to Chinese factory data for clues on the global outlook after the world’s second-largest economy slowed more sharply than expected in July. The nation’s key manufacturing gauge has fallen since April and a slide into contractionary territory could spur a rise in risk-off sentiment and hurt Asian currencies, report agencies.
“Markets are already starting to price in weaker global growth prospects in the months ahead, with peak growth having already passed,” said Mitul Kotecha, chief EM Asia and Europe strategist at TD Securities in Singapore. “China is contributing to this as seen in its recent data releases and this is likely to be echoed in the release of China’s August PMI data.”
Economists predict this week’s report will show that China’s manufacturing purchasing managers’ index dropped to 50.1 in August, the lowest since February 2020. A reading above the 50-mark signals an expansion in output. Chinese exports, retail sales and industrial production growth all missed economists’ estimates in July as a new wave of virus infections hurt consumption and global growth.