Sunday, 19 September, 2021

Slumping Asian currencies face more risk from slowdown in China

Slumping Asian currencies face more risk from slowdown in China

Popular News

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.

Regional exchange rates have struggled to navigate the fallout from the pandemic, with the Thai baht falling over 8 per cent to lag all its Asian peers this year. Taiwan’s dollar and the Chinese yuan have proven to be more resilient, but even they could find it hard to extend gains as the outlook dims, according to TD Securities.

“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.