China’s Yuan Fall on Weak Inflation, Asia FX Silent Before U.S. CPI

Chinese Yuan

 The Chinese Yuan fell slightly today after the recorded weak inflation readings for July, while most Asian currencies bided time, expecting the U.S. inflation data.

The Yuan fell 0.1% to 6.7567 against the Dollar. China’s consumer price and producer price indexes grew at a slower rate in July, disappointing market expectations and showing that the country was still battling with the disastrous COVID-19 lockdown.

Producer price inflation ebbed to a 17-month low, indicating that factory activity remained severely inhibited in the country. This augured badly for other Asian countries that depend on China as an export destination.

The Indonesian rupiah also fell 0.2%, while the Australian Dollar traded flat. The dollar index was largely unchanged. The Indian rupee strengthened slightly today as the oil price weakness reduced India’s crude bill. The currency, which rose 0.1% to 79.522, is especially sensitive to oil prices as India is dependent on crude imports. The Japanese Yen also strengthened slightly to the dollar.

Wider sentiment in Asian currency markets was muted ahead of U.S. inflation data, due at 0830 ET on Wednesday. The reading, which is expected to have eased slightly to an annual rate of 8.7% in July, might factor into the Federal Reserve’s plans for monetary policy.

The Fed’s rate hikes are negative for Asian markets, as they reduce the amount of foreign capital that can be invested in the continent.

You might also like Dollar Collapses After Lesser-Than-Anticipated U.S. Inflation Data.

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