Abstract：On Monday, most Asian currencies sank dramatically against the US dollar as concerns about a worldwide recession and increasing interest rates in the West weighed heavily on risky assets.
China's yuan was one of the day's worst performers, falling 0.5% to a fresh 2-year low of 7.1643. Despite many efforts taken by the People's Bank of China to limit additional currency losses, the yuan plummeted.
The PBOC said that it would increase the foreign exchange risk reserve requirements for financial institutions, making shorting the currency more costly. In addition, the central bank established a positive daily midpoint for the yuan.
The developments come as the yuan has been pummeled this year by a combination of dollar appreciation, lax monetary policy, and slowing Chinese economic growth.
The attention is now on the next Chinese PMI data for September, which is expected on Friday, for more indications of a possible Chinese economic revival.
Other Asian currencies fell to multi-year lows as well. The Indian rupee fell to a historic low of over 81 per dollar, while the South Korean won fell 0.8% to a more than 13-year low.
The Philippine peso likewise touched a new low versus the US dollar, while the Thai baht was Southeast Asia's worst performer, falling 0.9%.
The Japanese yen surpassed 144 per dollar, returning to levels recorded before the government intervened in currency markets. According to data released on Monday, although Japanese company activity increased marginally in September, the economy's outlook remained hampered by rising inflation.
The dollar index and dollar futures remained locked above 20-year highs as worries of a worldwide economic crisis grew after a slew of disappointing European economic data last week. The anticipation of more Federal Reserve interest rate rises boosted the greenback.
Currencies outside of Asia fell as well. The British pound hit a new low, as the euro moved farther away from parity with the US dollar. Markets anticipated that increasing interest rates and soaring inflation would be a double blow for global economic development.
Rising US interest rates and worries of a future recession have pummeled high-yield, high-risk Asian currencies this year. This trend is projected to continue for the rest of the year.
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