MW: Dollar gains as Asia Pacific currencies drop to multiyear lows
Several currencies in the Asian Pacific region dropped to fresh multiyear lows on Friday, while the dollar advanced against its major rivals.
“The weaker commodity price is helping to boost the dollar’s value against EM currencies,” said Marshall Gittler, head of global foreign-exchange strategy, at Iron FX, in a note Friday. EM refers to emerging markets, and many of those markets are in Asia Pacific.
See: Gold not even close to being biggest loser in commodities
Currencies in Asia Pacific accelerated their slide as Beijing signaled moves that could threaten regional growth and signs of a deepening slowdown in China emerged.
The Australian dollar AUDUSD, -0.8700% plummeted to its weakest level against the U.S. dollar in six years and Indonesia’s rupiah IDRUSD, -0.15594836% fell to its lowest level in almost two decades. South Korea’s won KRWUSD, -0.659060% fell almost 0.6% to its weakest in three years and Thailand’s baht THBUSD, -0.343741% weakened to its worst level since 2009.
Earlier Friday, China’s State Council announced policies to support the nation’s trade sector and signaled it might allow its currency to move in a wider range. The moves come amid sluggish demand at home and globally, and as an early gauge of China’s factory activity sank to a 15-month low.
See: The true cost of China’s multibillion-dollar intervention
Signals that China would allow its currency to move more freely, and potentially weaken, poses a threat to the regions’ struggling economies, as Chinese goods could become more competitive. Asia’s currencies already have faced intensifying pressure this year as the U.S. dollar broadly strengthens amid expectations the Federal Reserve will raise short-term interest rates.
Meanwhile, the ICE U.S. Dollar index DXY, +0.25% a measure of the dollar’s strength against a basket of six rival currencies, was last up 0.3% on Friday to 97.4270.
The buck USDJPY, +0.03% gained 0.1% against the yen to 123.99, and the euro EURUSD, -0.2367% fell 0.4% to $1.0938. The pound GBPUSD, -0.1225% slipped 0.2% to $1.5478.
