The Yuan’s weight is increased by 1.36% to 12.28% but the US Dollar’s weight is increased by 1.65% to 41.73%
Dollar sweeps back as haven of choice as everything gets sold
(May 6): The dollar is powering ahead against almost all its major peers, buoyed by higher Treasury yields and a sell-off of stocks that is turbocharging demand for the world’s reserve currency.
Bloomberg’s gauge of the greenback gained for the second day, approaching a two-year high set last month as investors sought shelter amid concern US Federal Reserve (Fed) interest-rate hikes will send the global economy into a recession. The risk-sensitive Norwegian krone and Australian dollar were among the biggest losers on Friday (May 6), while stock markets across the globe continued to tumble as investors flocked to the haven greenback.
“You’re probably not wanting to plonk your money down anywhere else other than dollars when all you’re focused on is safety,” said Vishnu Varathan, the head of economics and strategy at Mizuho Bank Ltd in Singapore. “The dollar is the only safe prize in town right now.”
A mix of higher interest rates and geopolitical uncertainty has boosted the Bloomberg Dollar Spot Index by more than 6% this year. Relentless dollar strength has hammered the yen in particular, with Japan’s currency sliding almost 12% since the end of December as the Bank of Japan’s dovish monetary policy diverges with the Fed’s hawkish rhetoric.
Elsewhere in Asia, the Taiwan dollar, the South Korean won and the Chinese yuan all dropped at least 0.5%. Emerging-market bonds were also being hammered after US 10-year yields climbed above 3% this week. Sovereign debt slid from South Korea to Malaysia on Friday as investors ditched growth-sensitive assets.
The dollar’s surge raises the spectre of greater intervention by Asian central banks looking to stem the rout in their currencies.
Some measures are already under way. Japanese officials have been vocalising their displeasure of the yen’s “disorderly” moves, while the People’s Bank of China has sought to curb the yuan’s weakness by cutting the amount of money banks need to have in reserves for foreign-currency holdings.
“King dollar still has more to gain over the coming months,” said Rodrigo Catril, a strategist at National Australia Bank Ltd in Sydney, who recommended a core long dollar position in portfolios. “The Fed remains resolute on its quest to quickly get to neutral if not going beyond.”
An $86 Billion Dividend Bill Threatens to Send Yuan Lower
- Chinese companies are poised to ramp up dividend payments
- Potential selling could add to downward pressure on yuan
6 May 2022, 6:00 am MYTUpdated on6 May 2022, 11:08 am MYT
Having plunged by the most on record in offshore trade last month, China’s yuan is now facing the threat of selling pressure from the nation’s companies.
Chinese firms are poised to ramp up dividend payments in coming months, with more than 500 Hong Kong-listed companies to hand out around HK$677 billion ($86.2 billion) this year, according to data compiled by Bloomberg as of Thursday. This summer’s June-August peak is set to be 16% larger in terms of payment size than the same period in 2021.
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