(Bloomberg) — An index of Asian currencies fell to the lowest in more than two years amid pessimism over China’s economic outlook and speculation a Trump administration will drive dollar gains.
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The Bloomberg Asia Dollar Index edged lower to 89.93, a level last seen in November 2022. The gauge has fallen more than 4% since the end of September, set for its worst quarterly performance in more than two years.
Sentiment over Asian currencies is turning sour as China’s lackluster measures to bolster its economy has weighed on the yuan — an anchor for its regional peers. President-elect Donald Trump’s tariff threats, ebbing bets for US interest-rate cuts and political turmoil in Korea have also hurt confidence.
“The double whammy of US tariff threats and higher dollar path are keeping Asian currencies under selling pressure,” said Ken Cheung, a strategist at Mizuho Bank in Hong Kong. “Mounting political uncertainties in Korea is adding fresh fuel on won selling, and that’s dragging other Asian currencies lower too.”
China’s economic data has continued to signal a fragile recovery, with the latest releases such as retail sales showing an unexpected slowdown in November. In Korea, the won has been hurt by a political saga, as investors are closely monitoring President Yoon Suk Yeol’s impeachment case. The Indian rupee fell to an all-time low on Tuesday.
And in the US, the dollar has jumped since Trump’s election victory as his “America First” policies are seen leading to a stronger greenback. Resilient inflation is also stoking bets that the Federal Reserve may slow its path of monetary easing.
The index tracks nine Asian currencies versus the US dollar with the heaviest weightings being the Chinese yuan and South Korean won.
“Sentiment has soured amid a generally buoyant dollar backdrop,” said Mitul Kotecha, head of Asian FX and EM macro strategy at Barclays Bank. “Dollar positioning does not appear overly crowded at present and the potential onset of tariffs is expected to keep the dollar supported against Asian FX.”
–With assistance from Ruth Carson and Malavika Kaur Makol.
(Updates with quote and background.)
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