# Asia shares slip, dollar strong as yuan weakens
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-22
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global Uncertainty Immersed - Rates, Markets & Future
Meta Description: Stay informed about central bank policies and investor expectations as Asian shares dip and the dollar rises amid global growth worries.
URL: https://financedigest.com/asia-shares-slip-dollar-strong-as-yuan-weakenshtml

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By Wayne Cole

SYDNEY (Reuters) – Asian shares slipped on Monday and the dollar extended its climb amid angst over global growth as most central banks keep raising rates, while a modest easing by China served only to highlight troubles in its property market.

U.S. Federal Reserve Chair Jerome Powell headlines a host of policy makers at Jackson Hole later in the week and the [risks are that he will not meet investor](https://www.financedigest.com/institutional-investors-back-shell-board-lawsuit-over-climate-risk.html "Institutional investors back Shell board lawsuit over climate risk") hopes for a dovish pivot on policy.

We expect a reminder that more tightening is needed and there is still a lot of progress to be done on inflation, but no explicit commitment to a specific [rate hike](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") action for September,” said Jan Nevruzi, an analyst at NatWest Markets.

“For markets, a bland delivery like that could be underwhelming.”

Futures are fully [priced for another hike](https://www.financedigest.com/investors-warn-big-consumer-firms-over-price-hikes-as-competitors-gain.html "Investors warn big consumer firms over price hikes as competitors gain") in September, with the only question being whether it will be 50 or 75 basis points. [Rates are seen reaching 3.5% to 3.75% by year end](https://www.financedigest.com/boe-raises-rates-again-as-investors-look-towards-end-of-hikes.html "BoE raises rates again as investors look towards end of hikes").

A Reuters poll of economists forecast the [Fed will raise rates](https://www.financedigest.com/wage-data-dents-dollar-recovery-before-fed-rate-decision.html "Wage data dents dollar recovery before Fed rate decision") by 50 basis points in September, with the risks skewed towards a higher peak.

One exception to the tightening trend is China, where the central [bank trimmed some key lending rates by between 5 and 15 basis points on Monday in a bid to support a slowing economy and a stressed housing sector](https://www.financedigest.com/sterling-rises-as-receding-bank-sector-worries-lift-sentiment.html "Sterling rises as receding bank sector worries lift sentiment").

Unease over [China’s economy tipped the yuan](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro") to a 23-month low, while pressuring stocks across the region.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell a further 0.6%, though Chinese blue chips did [manage to gain](https://www.financedigest.com/quest-gains-momentum-as-growth-of-devops-open-source-and-hybrid-database-environments-fuels-adoption-of-modern-database-management-solutions.html "Quest Gains Momentum as Growth of DevOps, Open Source and Hybrid Database Environments Fuels Adoption of Modern Database Management Solutions") 0.7%.

[South Korea’s KOSPI shed 1.3% while Japan’s](https://www.financedigest.com/south-korea-seeks-to-kickstart-talks-to-resolve-historical-feuds-with-japan.html "South Korea seeks to kickstart talks to resolve historical feuds with Japan") Nikkei fell 0.5%, though it has drawn support from the recent sharp reversal in the yen.

EUROSTOXX 50 futures lost 0.2% and FTSE futures 0.1%. S&P 500 futures [eased](https://www.financedigest.com/heres-how-to-secure-your-financial-future-with-ease.html "Here’s How To Secure Your Financial Future With Ease") 0.5% and Nasdaq futures 0.6%.

The S&P 500 has repeatedly failed to clear its 200-day moving average around 4,320 and [ended last week down 1.2%](https://www.financedigest.com/hp-to-cut-about-12-jobs-by-end-of-fiscal-2025.html "HP to cut about 12% jobs by end of fiscal 2025").

BofA’s latest survey of investors found most were still bearish, though 88% did expect [lower inflation](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") over time, the highest proportion since the financial crisis.

“That helps explain this month’s rotation into equities, tech and discretionary, and out of defensives,” said BofA strategist Michael Hartnett. “Relative to history, investors are still long defensives and short cyclicals.”

He remained a cautious bear, given [rising interest rates](https://www.financedigest.com/shares-slip-yields-rise-as-u-s-data-sparks-rate-hike-concerns.html "Shares slip, yields rise as U.S. data sparks rate hike concerns"), and recommended fading further S&P rallies above 4,328.

YIELDS SPIKE

Equity valuations were not helped by a steep rise in global [bond yields last week](https://www.financedigest.com/shares-and-bonds-nervy-as-rate-hike-week-looms.html "Shares and bonds nervy as rate-hike week looms"). British 10-year yields climbed by the most in five [years following a shock inflation](https://www.financedigest.com/spains-inflation-to-be-lower-this-year-than-in-2022-minister.html "Spain’s inflation to be lower this year than in 2022 -minister") report, while bund yields jumped on a sky-high rise in German producer prices.

Ten-year Treasury yields rose 14 basis points over the week and last stood at 2.98%, while the curve remained deeply inverted to reflect the [risk of recession](https://www.financedigest.com/high-inflation-recession-risk-widen-ecb-dilemma.html "High inflation, recession risk widen ECB dilemma"). \[US/\]

The general air of [global uncertainty has tended to boost](https://www.financedigest.com/optical-satellite-communication-market-emerging-trends-to-boost-the-global-revenue-growth-discussed-in-a-new-market-research-report-by-tmr.html "Optical Satellite Communication Market – Emerging Trends to Boost the Global Revenue Growth Discussed in a New Market Research Report by TMR") the U.S. dollar as the most liquid of safe havens, leaving it up at 108.22 on a [basket of currencies](https://www.financedigest.com/the-yuan-makes-its-official-entry-into-rawbanks-currency-basket.html "The yuan makes its official entry into RAWBANK’s currency basket"). Last week, it jumped 2.3% in its best performance since April 2020. \[USD/\]

The USD can track above 110.00 this week if the August flash PMIs for the major economies show a further slowing in economic growth or contraction in activity,” said Joseph Capurso, [head of international](https://www.financedigest.com/the-hidden-financial-woes-of-international-students-heading-for-the-uk.html "The Hidden Financial Woes of International Students Heading for the UK") economics at CBA, referring to surveys of manufacturing due on Tuesday.

We also [expect Powell to deliver a hawkish](https://www.financedigest.com/hawkish-ecb-comments-push-up-rate-hike-expectations.html "Hawkish ECB comments push up rate-hike expectations") message about inflation, in line with recent comments from other Fed officials supporting the USD.

The [dollar was firm at 137.25 yen](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles"), having shot up 2.5% last week, while the euro was struggling at $1.0036 after losing 2.2% last week.

Minutes of the European [Central Bank’s last policy meeting](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus") are due this week and are likely to sound hawkish, since they decided to hike by 50 basis points.

The rise in the [dollar has been a setback for gold](https://www.financedigest.com/stocks-and-gold-cheer-u-s-inflation-picture-while-dollar-slides.html "Stocks and gold cheer U.S. inflation picture, while dollar slides"), which was pinned at $1,745 an ounce. \[GOL/\]

Oil prices were also under pressure, amid worries about [global demand](https://www.financedigest.com/global-factory-activity-weakens-as-demand-falters.html "Global factory activity weakens as demand falters") and the high dollar, as well as consultations between the United States and the European Union on Iran’s response to the latest nuclear pact proposal. \[O/R\]

Brent was down $1.23 at $95.49, while U.S. crude lost $1.24 to $89.53 per barrel.

(Reporting by Wayne Cole; Editing by Shri Navaratnam and Clarence Fernandez)


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