Dollar pressure continues to beat down Asian currencies in wake of Trump election

Jasper Jolly
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Asian stocks and currencies have been put under pressure by a strong dollar (Source: Getty)

China’s yuan today fell to its weakest point since December 2008 against the dollar as concerns over US President-elect Donald Trump’s policies led investors to pile more pressure on Asian stocks.

The yuan fell to 0.146 against the dollar, continuing a steady decline from a peak of 0.165 in 2014 and a 52-week peak of 0.157. The dollar backed off an 11-month high against a basket of currencies.

The Indian rupee has also experienced a heavily post-election fall to five-month lows against the dollar, with extra volatility added by Prime Minister Narendra Modi’s ban on higher-value notes.

“The Asian market currencies are experiencing tremendous stress especially as they previously benefited from international capital inflows - which is currently under threat perhaps in anticipation of the protectionist fiscal policies of Donald Trump,” said Mihir Kapadia, chief executive of Sun Global Investments, an investment manager.

The protectionist policies Trump repeatedly outlined on the campaign trail have led investors to move money out of emerging markets in anticipation of trade tariffs. Trump spoke of tariffs of up to 45 per cent on Chinese goods.

The implication of a massive fiscal stimulus in the form of unfunded infrastructure spending has also increased appetite for US equities, to the detriment of emerging markets stocks.

The MSCI Asia Pacific Index was down 0.82 per cent in the day, falling to 134.23 from Monday’s close of 135.35. A gradual upward trend in Asian stocks was interrupted by Trump’s election victory. A short-lived bounce was not enough for stocks to recover from the three-point fall in the aftermath of the election.

Indonesian stocks also continued their slide, with the Jakarta Stock Exchange Composite Index falling 0.73 per cent in the day’s trading to 5,078. Before Trump’s election the index had reached a monthly peak of 5,491 points.

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