The Chinese yuan fell 0.1%, and remained close to breaching the 7 level as focus also turned to Chinese trade and inflation indicators this week. Markets are watching for any more cues on a Chinese economic recovery, after business activity readings for April pointed to a slowing rebound.
Analysts also expect weakness in Chinese imports and inflation to have persisted in April, pointing to a sluggish recovery even as the country relaxed most anti-COVID restrictions earlier this year.
The rate-sensitive South Korean won fell 0.2%, as did the Taiwan dollar. The Japanese yen rose 0.1%, buoyed by some safe haven demand. Data also showed that Japanese service sector activity grew at a record pace in April, pointing to some resilience in Asia’s second-largest economy.
Most Asian currencies had retreated sharply after data on Friday showed that U.S. nonfarm payrolls blew past expectations in April. The reading indicates that the labor market was running hot despite rising interest rates, and is likely to keep U.S. inflation elevated, which could see the Fed keep interest rates higher for longer.
But markets are largely pricing in the possibility that U.S. interest rates have peaked, with Fed Fund futures prices pointing to a 90% probability that the Fed will hold rates in June.
Focus this week is squarely on U.S. consumer price index inflation data, due on Wednesday. The reading is expected to show that while inflation eased slightly in April, it still remained well above the Fed’s 2% annual target range.
Markets are also awaiting more cues on a brewing U.S. banking crisis, with a Fed survey of U.S. loan activity due later in the day.
Asian currencies were also battered by these fears, given their heavy risk exposure.
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