Most Asian currencies fell on Monday, with the yuan taking a huge hit as China reported a record increase in daily Covid-19 cases. Meanwhile, the dollar gained from safe haven demand as investors worried about a possible escalation in the war between Russia and Ukraine drove up its value.
As fresh cases of Covid-19 skyrocketed in numerous Chinese cities, the yuan dropped 0.6% to a 10-day low and its offshore counterpart lost 0.7%. The People’s Bank of China kept its benchmark lending rates unchanged, which helped cushion the currency’s fall.
New lockdowns were imposed in several financial centers, including the capital Beijing and the commercial center Shanghai, due to the increasing number of infections. After a modest resurgence in the third quarter, the additional measures sparked fears that economic growth could fall again.
Other countries with strong trade exposure to China saw their currencies fall. South Korean won dropped 1% while Australian dollar lost 0.3%.
Thai baht also weakened to 35.90 against the greenback as investors awaited the release of the US Federal Reserve’s minutes later this week.
Concerns about a Chinese slowdown boosted demand for the US dollar, which is seen as a safe haven investment. The dollar index and dollar futures both gained about 0.3%, breaking through the 107 level and reaching a 10-day high.