The Chinese yuan was among the worst performers for the day, dropping 0.4% as official PMI data showed further deterioration in manufacturing activity
Most Asian currencies dropped on Tuesday, marking a weak start to the year as dismal Chinese economic figures continued to pile in, while the dollar stabilised in anticipation of more key U.S. data this week.
Sentiment towards Asian markets was also rattled by a devastating earthquake in central Japan, which destroyed scores of houses and disrupted train lines in the region. While Japanese markets were shut for a week-long holiday, the yen plunged 0.5% in slim trading volumes.
The Chinese yuan was among the worst performers for the day, dropping 0.4% as official PMI data showed further deterioration in manufacturing activity.
While a private survey showed some resilience in the sector, growth still remained largely modest, while employment and inflation failed to pick up substantially. The data indicated little signs of recovery in Chinese economic activity at the end of 2023.
The People’s Bank of China set a marginally stronger daily fix for the yuan after the dismal data. But the moved only marginally stemmed losses in the currency.
The yuan was among the worst-performing Asian currencies in 2023, down more than 3% as a post-COVID Chinese economic recovery largely failed to materialize.
Weakness in China also dented sentiment towards wider Asian markets, given the country’s status as a major trading hub for the region.
Wider Asian currencies were in a flat-to-low range, with focus largely on early interest rate cuts by the Fed in 2024. While bets on such a scenario had sparked some gains in Asian markets through late-2023, most currencies closed the year largely unchanged.
The Australian dollar gained less than 0.1% on Tuesday, while the South Korean won slipped 0.7% following weak manufacturing PMI and trade data.
The Singapore dollar dropped 0.2% even as data showed the island state’s economy grew more than expected in Q4 2023. But overall growth remained muted, with weakness in China likely to provide persistent headwinds.
