The Strategist

Asian currencies hit multi-year lows against US dollar

05/13/2022 - 08:47

On Thursday, Asian currencies fell to multi-year lows versus the US dollar, as the latest inflation data fueled the US currency's surge.

The dollar had strengthened significantly against various Asia-Pacific currencies by the close of the trading day in Hong Kong, including Australia, China, and South Korea.

The strengthening of the dollar is due in part to increased demand for US assets such as treasury bonds, whose yields have been rising this year. The dollar's rise also indicates a drop in risk appetite among investors.

Fears of a global economic slowdown and rising inflation, as well as the possibility that aggressive Federal Reserve action could spark a US recession, are causing stock indices around the world to decline.

For the world's top commodity importers, as well as developing nations with large debt burdens, falling exchange rates have become a particularly acute concern. Currency depreciation also makes it more difficult for central banks around the world to implement policies to deter capital outflows while still stimulating economic growth, which frequently involves reducing interest rates.