By Ambar Warrick
Investing.com — Most Asian currencies fell on Tuesday amid renewed fears of a global recession this year, with the yuan among the worst performers as data showed Chinese economic growth was pummeled by COVID lockdowns in 2022.
The yuan fell 0.4% to 6.7611, coming off a near five-month high after data showed that the Chinese economy grew at a substantially slower pace in 2022 than the prior year. The trend was driven largely by on-and-off anti-COVID lockdowns.
But the economy grew at a better-than-expected pace during the fourth quarter, with industrial production and retail sales data for December also beating expectations as the country began pivoting away from its strict zero-COVID policy.
While the relaxing of anti-COVID measures is expected to eventually spur a Chinese economic recovery this year, the mixed GDP data and surging COVID-19 cases have cast doubts over the timing of such a recovery.
Broader Asian currencies retreated as fears of a global recession were heightened by a World Economic Forum survey that showed that two-thirds of the economists polled expected a recession this year. A separate survey of business heads by PricewaterhouseCoopers also posited a glum outlook for the economy this year.
The Indonesian rupiah was the worst performer in Asia, losing 0.7%, while the Indian rupee and Philippine peso lost 0.3% and 0.4%, respectively. The rupee was also hit by data showing India logged weaker-than-expected wholesale inflation in December, as well as a widening trade deficit.
A global recession bodes poorly for Asian currencies, given that they usually benefit from a risk-on environment that ensures steady capital flows to the region. Headwinds in major economies could also spill over into Asia, further denting local growth and currencies.
The central bank is widely expected to keep interest rates unchanged at record lows on Wednesday. But any potential changes to its yield curve control are in focus after the bank unexpectedly altered the mechanism in December.