By Ambar Warrick
Investing.com-- Asian currencies tumbled on Thursday, plumbing milestone lows as a Federal Reserve and fears of an escalating Russia-Ukraine conflict pushed traders toward the dollar.
The Japanese yen was among the worst performers for the day, losing 0.6% and hitting a 24-year low of over 145 to the dollar. The Bank of Japan also held interest rates at ultra-low rates and maintained its dovish stance, pointing to more pressure on the Japanese currency.
China’s yuan fell 0.6%, hitting an over two-year low and coming close to 7.1 against the dollar, despite a strong daily midpoint fix by the People’s Bank of China.
The dollar index and dollar futures jumped to a new 20-year high on Thursday after the Fed raised interest rates by 75 basis points . Chairman Jerome Powell signaled that the bank will likely undertake more aggressive rate hikes to cap inflation, even amid potential risks to economic growth and the labor market.
The prospect of higher U.S. interest rates is bearish for Asian currencies, as the gap between risky and low-risk yields narrows. Regional currencies have fallen sharply this year on the same notion.
The dollar also benefited from increased safe haven demand on Thursday, after Russian President Vladimir Putin threatened to escalate the war in Ukraine. Putin ordered a partial mobilization of troops, and made a thinly-veiled threat to use nuclear weapons.
The move raised concerns over more disruptions to the global economy like those seen during the onset of the conflict earlier this year.
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