Asian FX Falls on Rate Risks, Yuan Rattled by Real Estate Woes

© Reuters.

By Ambar Warrick

AiVIF.com-- Most Asian currencies fell on Thursday as investors digested mixed signals from the U.S. Federal Reserve on its plans to hike rates, while China’s yuan sank on growing concerns over a real estate crisis.

The yuan fell 0.2% to 6.7912, trading near three-month lows as investors fretted over a downturn in the Chinese economy. A profit warning from major real estate developer Country Garden Holdings Company Ltd (HK:2007) brewed fresh concerns over a property market slowdown, which threatens to spill over into other facets of the economy.

The profit warning also comes after a series of weak economic readings from China over the past two weeks, which spurred increased stimulus measures by the government.

In another bearish sign for the yuan, the People’s Bank of China unexpectedly cut interest rates earlier this week.

Other Asian currencies fell on Thursday, after the minutes of the Federal Reserve’s July meeting showed that most members supported raising interest rates further to combat elevated inflation.

The Indian rupee fell 0.4%, while the South Korean won lost 0.3%. The Japanese yen was unchanged around 135.09.

The Fed acknowledged that it will eventually lower its pace of monetary tightening as inflation eases in the country. Softer-than-expected inflation readings from the United States for July saw traders pricing in a smaller rate hike by the Fed in September. But inflation is still pinned near 40-year highs.

The dollar index strengthened slightly after the minutes, and was trading 0.1% higher on Thursday. Dollar index futures also rose 0.1%.

Bucking the trend, the Philippine peso rose 0.2%, ahead of a widely anticipated interest rate hike by the central bank later in the day.

The Philippine central bank is expected to raise interest rates by 50 basis points to 3.25%, amid rising inflation in the Southeast Asian country.