Asia FX shrugs off hawkish Fedspeak, China in focus

Asia FX shrugs off hawkish Fedspeak, China in focus
© Reuters.

By Ambar Warrick 

Investing.com– Most Asian currencies recovered sharply from recent losses on Tuesday despite hawkish signals from the Federal Reserve, with focus remaining squarely on COVID-related protests in China and the government’s response. 

The rose 0.4% to 7.1792 against the dollar, recovering from a nearly three-week low hit in the prior session, while the jumped 0.8%. 

Civilian protests against the government’s strict zero-COVID policies appeared to have simmered down after escalating over the weekend. Concerns over more economic disruptions from the protests caused deep declines in markets on Monday, although markets stabilized from their losses later in the session. 

Some analysts opined that the protests could also push the government into eventually scaling back its zero-COVID policy- a scenario that is largely positive for Chinese and broader Asian markets. But given that the country is grappling with a record-high daily increase in infections, chances of a zero-COVID reversal in the near-term appear slim. 

Beijing also rolled out more stimulus measures targeting the real estate sector, which supported sentiment towards the country and boosted local stocks. 

Broader Asian currencies tracked a recovery in Chinese markets, brushing off hawkish comments from two Federal Reserve officials that suggested that U.S. interest rates will stay high until well into 2022. The added 0.4%, while the led gains across Asia with a 1.2% jump.

The and fell 0.4% on Tuesday, but hovered above the 106 level, retaining some gains made in the prior session as concerns over China drove up safe haven demand.

But an increasing number of market participants are now betting against the dollar on the notion that U.S. inflation has peaked, warranting by the Fed. 

Fed members have signaled that future rate action will largely depend on inflation, which is currently trending well above the Fed’s 2% annual target. Focus this week is on an address by on Wednesday, as well as on Friday. 

The rose 0.2%, even as data for October missed market expectations, heralding more pressure on the world’s third-largest economy. Expectations of a dovish Fed have benefited the currency in recent weeks. 

Among Antipodean currencies, the jumped 0.8%, while the added 0.7%. 

Dollar rebounds on Fed expectations, Aussie drops

Dollar rebounds on Fed expectations, Aussie drops
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Karen Brettell

NEW YORK (Reuters) – The dollar clawed back earlier losses on Monday as a hawkish Federal Reserve official laid out the case for further rate hikes, while the Australian dollar sank on concerns about unrest over COVID-19 restrictions in China.

The greenback rebounded in early U.S. trading and added to gains after St. Louis Fed President James Bullard said the U.S. central bank needs to raise interest rates quite a bit further and then hold them there throughout next year and into 2024 to gain control of inflation and bring it back toward the Fed’s 2% goal.

Comments from Fed Chair Jerome Powell on Wednesday will be watched for any new signals on further tightening with key U.S. jobs data for November also due on Friday. The U.S. central bank is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14.

“The markets have hit a bit of a plateau about what they’re expecting. They know that the Fed’s going to raise rates, and that’s behind everything, but they’re not sure how much or when,” said Joseph Trevisani, senior analyst at FXStreet.com.

The has fallen to 106.65 from a 20-year high of 114.78 on Sept. 28 on expectations that its rally may have been over stretched and as the Fed looks to slow its pace of rate increases.

Some of the recent decline is also likely due to investors and traders booking profits before year-end, said Trevisani, noting many trading firms curtail activity in December.

The greenback was also likely supported after the dollar index reached the 200-day moving average at 105.369.

The index also posted an outside day, reaching both a higher high and a lower low than the previous session, which could bode well for further gains, Tom Fitzpatrick, chief technical strategist at Citigroup (NYSE:), said in a note.

It is the first bullish outside day on the dollar index since the high reached on Sept. 28 and is the first time it has tested the 200-day moving average since June 2021, he said.

The dollar had dipped earlier on Monday despite other safe-haven currencies the Japanese yen and the Swiss franc gaining on concerns about China.

Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China’s stringent COVID restrictions flared for a third day and spread to several cities in the wake of a deadly fire in the country’s far west.

The greenback was last down 0.23% to 138.82 Japanese yen. The euro dipped 0.62% to $1.0403.

The risk sensitive dollar, which is strongly tied to Chinese growth, was the worst performing major currency, falling 1.61% to $0.6649. The currency was also dented by data showing Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending.

The offshore yuan weakened against the dollar to 7.2468.

fell after major cryptocurrency lender BlockFi filed for Chapter 11 bankruptcy protection along with eight affiliates, the latest crypto casualty to follow the spectacular collapse of the FTX exchange earlier this month.

The cryptocurrency was last down 1.18% at $16,231.

Yen, Swiss franc gain on China concerns, dollar drops

Yen, Swiss franc gain on China concerns, dollar drops
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Karen Brettell

NEW YORK (Reuters) – The safe-haven Swiss franc and Japanese yen gained on Monday, while the dollar and Chinese yuan underperformed as protests against COVID restrictions in China knocked market sentiment.

The U.S. dollar dipped, meanwhile, which analysts said was unusual as it ran counter to its typical role as a safe haven.

Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China’s stringent COVID restrictions flared for a third day and spread to several cities in the wake of a deadly fire in the country’s far west.

“We’re really looking at the government response to what’s happening… the government response is so unpredictable, and of course that just means de-risking,” said Chris Weston, head of research at Pepperstone.

The greenback dipped 0.46% to 138.51 Japanese yen, and fell 0.41% against the Swiss franc to 0.9440. The Euro gained 0.29% to $1.0433.

Shaun Osborne, chief FX strategist at Scotiabank in Toronto, said that the move in the dollar could reflect a shift in market sentiment towards the U.S. currency, but noted that its too soon to be certain.

“It does suggest perhaps that the swing against the dollar in the sense of the broader market mood or market positioning is perhaps running a little bit deeper this morning and that might well be significant,” Osborne said.

The has fallen to 105.85 from a 20-year high of 114.78 on Sept. 28 on expectations that its rally may have been overstretched and as the Federal Reserve looks to slow its pace of rate increases.

The risk sensitive Aussie dollar was the worst performing major currency, falling 0.93% to $0.6692. The currency was also dented by data showing that Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending.

The offshore yuan weakened against the dollar to 7.2273.

Fed policy will remain a key focus for the market this week with Fed Chair Jerome Powell due to speak on Wednesday, and with key jobs data for November due on Friday.

The U.S. central bank is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14.

========================================================

Currency bid prices at 9:48AM (1448 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 105.8500 106.3400 -0.44% 10.649% +106.5200 +105.3100

Euro/Dollar $1.0433 $1.0403 +0.29% -8.23% +$1.0497 +$1.0342

Dollar/Yen 138.5100 139.1650 -0.46% +20.33% +139.4350 +137.5000

Euro/Yen 144.50 144.75 -0.17% +10.88% +145.0000 +143.0600

Dollar/Swiss 0.9440 0.9480 -0.41% +3.50% +0.9479 +0.9407

Sterling/Dollar $1.2053 $1.2089 -0.28% -10.86% +$1.2118 +$1.2027

Dollar/Canadian 1.3454 1.3400 +0.41% +6.41% +1.3473 +1.3395

Aussie/Dollar $0.6692 $0.6756 -0.93% -7.92% +$0.6728 +$0.6667

Euro/Swiss 0.9849 0.9833 +0.16% -5.03% +0.9890 +0.9793

Euro/Sterling 0.8654 0.8598 +0.65% +3.02% +0.8675 +0.8587

NZ $0.6208 $0.6247 -0.59% -9.27% +$0.6244 +$0.6193

Dollar/Dollar

Dollar/Norway 9.9245 9.8765 +0.60% +12.79% +9.9800 +9.8835

Euro/Norway 10.3517 10.2549 +0.94% +3.38% +10.3856 +10.2623

Dollar/Sweden 10.4313 10.4112 +0.61% +15.67% +10.5028 +10.3700

Euro/Sweden 10.8834 10.8171 +0.61% +6.35% +10.8988 +10.8406

Dollar drops, yuan slumps on COVID unrest in China

Dollar drops, yuan slumps on COVID unrest in China
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Harry Robertson and Rae Wee

LONDON/SINGAPORE (Reuters) – The dollar fell sharply against Japan’s yen on Monday as investors focused on rare protests in China, which pushed the yuan to a two-week low.

Protests have flared across China and spread to several cities in the wake of an apartment fire that killed 10 people in the city of Urumqi in the far west. Hundreds of demonstrators and police clashed in Shanghai on Sunday night.

China’s onshore yuan finished the domestic session around 0.5% lower at 7.199 per dollar, the lowest close since Nov. 10. The offshore yuan fell to a more than two-week low in Asian trading and was last down 0.28% at 7.214.

The Australian dollar, often used as a proxy for the yuan, slid 0.67% to $0.671.

“We’re really looking at the government response to what’s happening … the government response is so unpredictable, and of course that just means derisking,” Chris Weston, head of research at Pepperstone, said.

Elsewhere in currency markets, the dollar was last down 0.69% to 138.18 yen . Earlier in the session it hit 137.57, its lowest level since Aug. 26.

The dollar also dropped against the euro, which was last up 0.69% to $1.048, around its highest level since late June.

On a day when investors are concerned about China, the drop in the safe-haven dollar was confusing, Chris Turner, head of market research at ING, said.

“With that uncertainty coming out of China you might understand that the yen is rising as a defensive trade,” he added. “The thing that doesn’t make sense is the decent rally in euro/dollar today.”

The U.S. dollar has been softening over the past few weeks on hopes that the Federal Reserve would soon slow its pace of rate hikes – a view that was supported by minutes of the Fed’s November meeting released last week.

The opened higher on Monday after closing on Friday at 106.05, but was last down 0.76% to 105.53.

Fed Chair Jerome Powell is due to speak on the outlook for the U.S. economy and the labour market at a Brookings Institution event on Wednesday, which could provide more clues on the outlook for U.S. monetary policy.

Stephen Gallo, European head of FX strategy at BMO Capital Markets, said a fall in U.S. bond yields was making the dollar less attractive versus the yen.

“Net-long dollar/yen remains one of the larger positions amongst FX leveraged funds, and these declines in appetite and longer-term yields may have spooked some investors,” he said.

Global stocks fell, with analysts worried about the situation in China. China’s stringent COVID restrictions have taken a heavy toll on its economy, and authorities have implemented various measures to revive growth.

“Companies (in China) are currently facing weaker retail sales from a higher number of COVID cases and falling home prices from unfinished home projects,” Iris Pang, chief economist for Greater China at ING, said.

On Friday, the People’s Bank of China (PBOC), the nation’s central bank, said it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from Dec. 5.

Dollar slips, while yuan slumps on COVID unrest in China

Dollar slips, while yuan slumps on COVID unrest in China
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Rae Wee and Harry Robertson

SINGAPORE/LONDON (Reuters) – The dollar weakened on Monday as investors weighed up the recent drop in U.S. government bond yields, while anti-government protests in China sent the yuan to a two-week low.

Protests have flared across China and spread to several cities in the wake of an apartment fire that killed 10 people in the city of Urumqi in the country’s far west. Hundreds of demonstrators and police clashed in Shanghai on Sunday night.

China’s onshore yuan finished the domestic session around 0.5% lower at 7.199 per dollar, the lowest close since Nov. 10. The offshore yuan fell to a more than two-week low in Asian trading and was last down 0.1% at 7.201.

“We’re really looking at the government response to what’s happening … the government response is so unpredictable, and of course that just means derisking,” said Chris Weston, head of research at Pepperstone.

The Australian dollar, often used as a proxy for the yuan, slid 0.7% to $0.671.

Elsewhere in currency markets, the dollar was last down 0.99% to 137.77 yen. Earlier in the session it hit 137.57, its lowest level since Aug. 26.

Stephen Gallo, European head of FX strategy at BMO Capital Markets, said a fall in U.S. bond yields was making the dollar less attractive.

“Risk-off conditions in global markets related to China’s COVID situation appear to be showing up in lower long-term sovereign debt yields,” he said. 

“Net-long dollar/yen remains one of the larger positions amongst FX leveraged funds, and these declines in appetite and longer-term yields may have spooked some investors.”

Meanwhile, the euro rose 0.41% to $1.0445, while sterling was up 0.17% at $1.21.

China’s stringent COVID restrictions have taken a heavy toll on its economy, and authorities have implemented various measures to revive growth.

“Companies (in China) are currently facing weaker retail sales from a higher number of COVID cases and falling home prices from unfinished home projects,” said Iris Pang, chief economist for Greater China at ING.

On Friday, the People’s Bank of China (PBOC), the nation’s central bank, said it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from Dec. 5.

The latest developments in China appeared unable to stem the U.S. dollar’s decline, which has been softening over the past few weeks on hopes that the Federal Reserve would soon slow its pace of rate hikes – a view that was supported by minutes of the Fed’s November meeting released last week.

The opened higher on Monday after closing on Friday at 106.05, but was last down 0.66% at 105.65.

Fed Chair Jerome Powell is due to speak on the outlook for the U.S. economy and the labour market at a Brookings Institution event on Wednesday, which could provide more clues on the outlook for U.S. monetary policy.

Dollar gains on safe-haven flows after China’s COVID protests

Dollar gains on safe-haven flows after China's COVID protests
© Reuters

By Peter Nurse

Investing.com – The U.S. dollar traded higher in Europe early Monday, and the Chinese yuan slumped to a two-week low as protests against the Chinese government’s mobility restrictions to combat surging COVID cases prompted safe haven flows.

At 02:50 ET (07:50 GMT), the , which tracks the greenback against a basket of six other currencies, rose 0.1% to 106.055, climbing away from the three-month low of 105.30 hit last week.

China posted another record high COVID-19 infections on Monday, and the extent of the country’s restrictive mobility curbs prompted a series of protests in a number of cities, with large swathes of the population showing their frustration that these restrictions were still in place three years after the original outbreak.

These rare protests raised worries about the viability of China’s zero-COVID policy and its impact on the world’s second-largest economy, pushing up 0.3% to 7.1963, at a two-week high.

While the U.S. dollar has traded higher Monday, its gains have been held back by growing that the will hike interest rates by a smaller degree in the coming months.

With this in mind, attention will focus on Friday’s U.S. for November as traders look for signs that the U.S. economy is struggling under the weight of this year’s aggressive interest rate rises.

It will be the last nonfarm payrolls report before the Fed’s final meeting of the year in December, and economists are expecting the U.S. economy to have added 200,000 new jobs, in what would be the smallest increase since December 2020.

Additionally, Fed Chair is to discuss the economic outlook on Wednesday, while St. Louis Fed President and New York Fed President are both due to speak later Monday.

fell 0.1% to 1.0383, ahead of a speech by ECB President to the European Parliament, later in the session.

Traders will be looking for clues as to whether the will continue with a 75-basis-point rate increase in December, given traded above 10% in October, or whether a hike of 50 basis points is more appropriate as the region heads into recession.

fell 0.2% to 1.2073, retreating from the three-month high of 1.2153 seen late last week, while the risk-sensitive slumped 0.9% to 0.6686, with slowing Chinese growth likely to hit demand for Australia’s raw materials.

fell 0.7% to 138.13, with the Japanese yen helped by market expectations of a less hawkish Federal Reserve, while inflation in Japan’s capital, Tokyo, rose more than expected to a 40-year high in November, data showed on Friday.

Dollar rises, yuan slumps as China’s COVID unrest spooks markets

Dollar rises, yuan slumps as China's COVID unrest spooks markets
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Rae Wee

SINGAPORE (Reuters) – The dollar climbed on Monday as protests in China against the government’s anti-COVID policies made investors turn away from riskier assets, and consigned the Chinese yuan to a more than two-week low against the safe-haven greenback.

The protests have flared across China and spread to several cities in the wake of an apartment fire that killed 10 people in Urumqi in the country’s far west. Hundreds of demonstrators and police clashed in Shanghai on Sunday night.

Investors were worried over how the government in Beijing would react to the the wave of civil disobedience when COVID cases are rising.

“We’re really looking at the government response to what’s happening … the government response is so unpredictable, and of course that just means derisking,” said Chris Weston, head of research at Pepperstone.

The offshore yuan fell to an over two-week low in Asian trading, and was last roughly 0.4% lower at 7.2242 per dollar.

The Australian dollar, often used as a liquid proxy for the yuan, slid more than 1% to $0.6681. The fell 0.72% to $0.6202.

China’s stringent COVID restrictions have taken a heavy toll on its economy, and authorities have implemented various measures to revive growth. On Friday, the People’s Bank of China (PBOC), the nation’s central bank, said it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from Dec. 5.

“If the RRR cut is the only monetary policy tool that the PBOC is going to implement, it may not lead to a significant increase in bank lending,” said Iris Pang, chief economist for Greater China at ING.

“Companies are currently facing weaker retail sales from a higher number of COVID cases and falling home prices from unfinished home projects.”

Elsewhere in the currency market, the euro fell 0.5% to $1.0350, while sterling was down 0.26% at $1.2057.

The latest developments in China have put a pause on the U.S. dollar’s decline, which had been softening over the past few weeks on hopes that the Federal Reserve would soon slow its pace of rate hikes – a view that was supported by the November meeting minutes released last week.

Against a basket of currencies, the rose 0.07% to 106.41, edging away from its recent three-month low of 105.30.

Fed Chair Jerome Powell is due to speak on the outlook for the U.S. economy and the labour market at a Brookings Institution event on Wednesday, which couldy provide more clues on the outlook for U.S. monetary policy.

Market expectations of a less hawkish Fed have helped the Japanese yen gain a footing, said Moh Siong Sim, a currency strategist at Bank of Singapore.

The yen was up about 0.5% to 138.40 per dollar.

“The market is thinking that the Fed downshifts to a 50-basis-point rate hike and perhaps going to a pause next year, and that might limit the upside in U.S. (Treasury) yields. And dollar/yen is probably queuing into that sort of idea.”

Asia FX hit by China COVID unrest, dollar rises on safe haven flows

Asia FX hit by China COVID unrest, dollar rises on safe haven flows
© Reuters

By Ambar Warrick

Investing.com– Most Asian currencies fell on Monday as worsening civil unrest in China over its strict anti-COVID policy rattled sentiment, while the dollar rose as fears of a Chinese economic slowdown drummed up safe haven demand.

fell 0.4% to 7.1997 against the dollar and traded at an over two-week low, while the fell 0.2%. While both currencies trimmed initial losses, their outlook remained bleak.

Chinese protestors clashed with the police in several major cities over the weekend, amid growing public discontent over the government’s strict anti-COVID measures. A deadly fire in Ürümqi, which was linked to the lockdown measures, triggered a wave of protests in the country.

The unrest could now potentially further hamper Chinese economic growth, which is already reeling from the country’s strict anti-COVID measures this year. China is also grappling with a record-high increase in daily COVID-19 cases.

Currencies of countries with a high trade exposure to China fared poorly. The and fell 0.2% each.

The slumped 0.9%, also coming under pressure from weaker-than-expected data.

The and rose 0.4% each to over 106, recovering from recent losses amid increased safe haven demand for the greenback. Global commodity markets tumbled on Monday amid fears of worsening demand in China.

But gains in the dollar were held back by growing expectations that the Federal Reserve in the coming months. Such a scenario is positive for Asian currencies, and spurred strong gains over the past two weeks.

However, markets remain uncertain over where U.S. interest rates will peak, given that inflation is still well above the Fed’s target. This sentiment may limit gains in Asian currencies in the near-term.

Among other Asian currencies, the rose 0.4% on Monday, benefiting from a mix of safe-haven demand and bargain buying.

Recent weakness in the Japanese economy drove some expectations that the Bank of Japan will be pushed into tightening its ultra-loose monetary policy.

Losses in the were muted by a drop in oil prices, given that India imports a bulk of its crude requirements.

In Southeast Asia, the fell 0.3% after data showed the country’s and shrank unexpectedly in October. But the country’s also narrowed significantly.

Dollar gains, yuan slides as China’s COVID unrest spooks markets

Dollar gains, yuan slides as China's COVID unrest spooks markets
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Rae Wee

SINGAPORE (Reuters) – The dollar climbed on Monday as protests against COVID restrictions in China rattled financial markets, sending the yuan sliding and pushing nervous investors toward the safe-haven greenback.

The COVID protests have flared across China and spread to several cities in the wake of a deadly fire in Urumqi in the country’s far west, with hundreds of demonstrators and police clashing in Shanghai on Sunday night.

Worries over the unprecedented wave of civil disobedience in a country where in-person protests are rare, the rising COVID cases, as well as how Beijing will react to the situation kept investors on edge.

The offshore yuan fell to an over two-week low in Asian trading, and was last roughly 0.6% lower at 7.24 per dollar.

The Australian dollar, often used as a liquid proxy for the yuan, slid more than 1% to $0.6687. The slumped 0.65% to $0.62065.

“The pushback from residents that we’ve been seeing, obviously the rising tensions and protests … that was something we probably haven’t been expecting to that degree,” said Chris Weston, head of research at Pepperstone.

“We’re really looking at the government response to what’s happening … the government response is so unpredictable, and of course that just means derisking.”

The stringent COVID restrictions have taken a heavy toll on China’s economy, and authorities have implemented various measures to revive growth. On Friday, the People’s Bank of China (PBOC), the nation’s central bank, said it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from Dec. 5.

“If the RRR cut is the only monetary policy tool that the PBOC is going to implement, it may not lead to a significant increase in bank lending,” said Iris Pang, chief economist for Greater China at ING.

“Companies are currently facing weaker retail sales from a higher number of COVID cases and falling home prices from unfinished home projects.”

Elsewhere, the euro fell 0.43% to $1.03575, while sterling was down 0.51% at $1.2027.

The latest developments in China have put a pause on the U.S. dollar’s decline, which had been softening over the past few weeks on hopes that the Federal Reserve would soon slow its pace of rate hikes – a view that was supported by the November meeting minutes released last week.

Against a basket of currencies, the firmed to 106.34, edging away from its recent three-month low of 105.30.

Fed Chair Jerome Powell is due to speak on the outlook for the U.S. economy and the labour market at a Brookings Institution event on Wednesday, which will likely provide more clues on the U.S. monetary policy outlook.

Market expectations of a less hawkish Fed have helped the Japanese yen gain a footing, said Moh Siong Sim, a currency strategist at Bank of Singapore.

The yen was up about 0.5% to 138.46 per dollar.

“The market is thinking that the Fed downshifts to a 50-basis-point rate hike and perhaps going to a pause next year, and that might limit the upside in U.S. (Treasury) yields. And dollar/yen is probably queuing into that sort of idea.”

Dollar rises broadly, yuan slumps as China’s COVID unrest rattles sentiment

Dollar rises broadly, yuan slumps as China's COVID unrest rattles sentiment
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Rae Wee

SINGAPORE (Reuters) – The dollar gained broadly on Monday as protests against COVID restrictions in China stoked uncertainty and dented sentiment, sending the yuan sliding and pushing nervous investors toward the safe-haven greenback.

The COVID protests have flared across China and spread to several cities in the wake of a deadly fire in Urumqi in the country’s far west, with hundreds of demonstrators and police clashing in Shanghai on Sunday night.

Against the offshore yuan, the dollar rose 0.76% in early Asia trade to 7.2456.

The , which is often used as a liquid proxy for the yuan, fell 0.61% to $0.6714, while the slumped 0.5% to $0.6216.

“That’s a new layer of concern in China that needs to be watched closely,” said Rodrigo Catril, a currency strategist at National Australia Bank (NAB), of the protests.

“Certainly at the start of the week, it will set the tone. And I suppose what will be the focus as well, will not only be the imposition of restrictions that China may introduce, if any, but the level of contagion as well.”

In an attempt to bolster China’s slowing economy – which has struggled under its stringent COVID restrictions – the nation’s central bank said on Friday that it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from Dec. 5.

“If the RRR cut is the only monetary policy tool that the PBOC is going to implement, it may not lead to a significant increase in bank lending,” said Iris Pang, chief economist for Greater China at ING.

“Companies are currently facing weaker retail sales from a higher number of COVID cases and falling home prices from unfinished home projects.”

Elsewhere, the euro fell 0.25% to $1.0377, while sterling was down 0.24% at $1.2060.

The Japanese yen edged about 0.1% lower to 139.27 per dollar.

The latest developments in China have put a pause on the U.S. dollar’s decline, which had been softening over the past few weeks on hopes that the Federal Reserve would soon slow its pace of rate hikes – a view that was supported by the Fed’s November meeting minutes released last week.

Against a basket of currencies, the was down 0.08% at 106.25, but off its recent three-month low of 105.30.

Overall, however, it remains on track for a monthly decline of nearly 5%, the largest in 12 years as investors latched on to the signs of a turn in the Fed’s hawkish policy stance.

Fed Chair Jerome Powell is due to speak on the outlook for the U.S. economy and the labour market at a Brookings Institution event on Wednesday, which will likely provide more clues on the U.S. monetary policy outlook.

“(He) is pretty likely to push back a little bit on that ease of financial conditions that we’ve seen in recent times. Ultimately, from a Fed perspective, the main concern is the fight against inflation, and that battle hasn’t yet been won,” said NAB’s Catril.