Currencies In Asia Drop Near Record Lows After Sudden Shift in Sentiment in Global Bond Markets

Arjun Pandit
26 Sep, 2023
Mumbai

Asian markets fell sharply after global bond yields advanced and currencies in the region weakened against the U.S. dollar. 

The fear of rising U.S. bond yields spilling over in Asia pushed currencies to record lows in China, India and the yen dropped to the level not seen since April 1990. 

The Korean won weakened to the level last seen 11 years ago, barring a weakness in the third quarter in 2022.  

U.S. Treasury yields jumped to 16-year highs and bond yields in the Euro Area also advanced to 12-year highs as central banks signaled a higher-for-longer stance. 

Investors are finally incorporating higher interest rate scenarios and are suddenly pricing in higher policy rate trajectory after months of announcements by the U.S. Federal Reserve.  

Rising bond yields negatively impacted high growth stocks, and tech stocks are set to close down more than 4% worldwide in September, extending sell-off for the second month in a row. 

Moreover, the looming U.S. government shutdown also kept bond yields rising and the federal government is set to run out of cash in five days, if lawmakers fail to pass a spending plan for the fiscal year starting October 1.   

Moody's Investors Service said on Monday that the U.S. federal government shutdown will be "credit negative" and could hamper the country's AAA rating, and push bond yields higher. 

"In particular, it would demonstrate the significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits and deteriorating debt affordability," Moody's said in a statement. 

 

Asia Market Indexes 

Rising bond yields dragged market indexes across Asia with the benchmark indexes in Tokyo and Hong Kong leading the losers. 

In Monday's trading, the Nikkei index decreased 1.1% to 32,315.05 and the yen briefly crossed 149 against the U.S. dollar.  

Market indexes in China traded lower on the worries linked to the property market and worries of rising capital outflow on the rising bond yields. 

In China trading, the Shanghai SSE Composite index inched down 0.4% to 3,102.27 and the Hang Seng index decreased 1.4% to 17,481.77 and the KOSPI index declined 1.3% to 2,463.63. 

The Hang Seng index dropped to a 10-month low last seen in November after the U.S. Treasury yields advanced, prompting fears of higher corporate borrowing costs and more pressure on emerging markets.

China's yuan dropped to 7.30 in offshore trading and hovered at a 16-year low as investors continue to pull money out of Chinese markets.   

The Sensex index decreased 11.37 points to 66,012.32 and the Nifty index added 9.50 points to 19,684.05. 

On the Mumbai stock exchange, 78 stocks traded at their 52-week highs and 13 fell to their 52-week lows. 

In the previous week, the Nikkei index decreased 3%.2, the SSE Composite index rose 0.7%, the Hang Seng index was unchanged and the Sensex dropped 2.4%.