Nervousness Caused By US Feds Results In Muted Asian FX, CNY Performs Well

The most powerful and prominent currencies from Asia did not have a good day on Friday as most of them did not show any significant movements.

Most Asian Currencies were Muted

The majority of the Asian currencies recorded a muted performance in the Friday forex session. Once again, it is the US Feds and their decisions that have occupied the minds of Asian investors.

They want to make a move in the forex market but only once the US Feds have shared their thoughts about the interest rate hikes.

Given the recent developments in the US economy, there are mixed comments coming in from the US Feds.

Two Sides, Two Suggestions

Two sides have been formed not only among the Feds but the economists as well, about the interest rate hikes. One group of investors is determined to keep up with the current monetary policy.

For them, the only way to deal with the rising inflation rates is to continue implementing interest rates on a monthly basis. This way, the inflation rates would finally lose their heat and things will get back to normal.

The interest rate increase means that the value of the dollar will keep growing stronger against the rival and counterpart currencies/assets.

The other wants to move in the other direction. They are of the view that further increases would result in the economy’s collapse. They fear that the current policy may result in the country’s economic recession.

Therefore, it is very important that a reliable and effective policy is adopted to make things right. A policy that does not put stress on the interest rates and brings the inflation rates under control.

Performance of the Chinese Yuan

While most of the Asian currencies did not make any significant move, the Chinese yuan demonstrated a strong performance.

The most significant aspect of the yuan was the currency remaining at the top throughout the week. The performance of the yuan was promising not only for the Chinese but for the Asian market as well.

The yuan was among the best-performing currencies and assets throughout the week. The latest forex market data showed that the trading price of the yuan surged by 0.1% in the latest trading session.

As for the entire week, the trading price of the yuan recorded a 0.8% surge.

China’s Economy is Recovering

According to analysts/economists, the Chinese economy has been recovering at a rate faster than expected.

The economy is not only recovering but it is growing stronger, which is a positive sign for traders. With the Chinese currency recovering, the Asian currencies will grow stronger as well.

On top of the Asian currencies, the commodity currencies such as the New Zealand dollar, the Australian dollar, and the Canadian dollar would gain strength.

Even the service sector in China has been growing stronger than what the analysts had predicted in the first place.

When it comes to business activity, no other sector has recorded a growth level higher than this in February.

In general, February has turned out to be a stronger-than-expected month for the Chinese economy. According to the statistics, the business growth rate recorded in February is the highest rate recorded for the segment in over a decade.

Compared to the rest of the world, China has shown the fastest post-COVID recovery in terms of economic performance.

The only Asian country that has the potential to deliver a strong performance in the ongoing week is South Korean won. The analysts are also keeping high hopes for the Australian dollar.

Performance of Other Asian Currencies

In the latest session, the value of the Japanese yen and the Indian rupee rose 0.1% against the dollar. The Indian rupee is set to record 0.8% gains for the entire week.