U.S. dollar Extends Losses Against Most Asian Currencies

[B]U.S. dollar extends losses against Asian Currencies after a report showing a big drop in U.S. pending home sales[/B]

The U.S. dollar sold off against most Asian currencies after a report showed that problems in the housing market were getting worst. Pending sales of existing homes fell in July to the lowest level in nearly six years according to the National Association of Realtors. The sell off accelerated following the release of the Federal Reserve Beige Book, which describes economic conditions in regions around the United States. Most districts reported that "the recent developments in financial markets had led to tighter lending standards for residential mortgages, which was having a noticeable effect on housing activity, and several noted that the reduction in credit availability added to uncertainty about when the housing market might turn around. The Chinese yuan appreciated to 7.5565 to the dollar on the over the counter market and is now up by more than 250 pips since the beginning of August. Moreover, one year onshore yuan forwards traded at 7.2082 to the dollar, anticipating the yuan would be 5 percent stronger in one year’s time.

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[B]Asian Stock markets had a mixed day as investors remain worried over the state of the US economy[/B]

Asian Stock markets had a mixed day. The Shanghai Composite Index, which covers shares listed on the Shanghai Stock Exchange, closed up 16.67 points at 5,310.72 propelled higher by energy stocks. On the other hand, the Korea Composite Stock Price Index closed down 9.15 points at 1,865.59 (Hyundai Steel stocks plunged nearly 6% as investors remain worried over the state of the US economy). Moreover, the Hang Seng advanced 0.77 per cent to 24,069.17, the Taiwan Weighted Index was down 0.10 per cent and the Straits Times rose more than 2 per cent to 3,445.08.
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[B]Rapid yuan gains may hurt the Chinese economy[/B]
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[B]Every week, we are seeing the Chinese yuan hitting new highs against the U.S. dollar. Yet, further appreciation of the RMB could eventually hurt the Chinese economy. Previously, Tang Xu, director of the research bureau of the People’s Bank of China governor said that “If the yuan rises too rapidly, a lot of overseas investors might move their factories or companies out of China. That would increase unemployment and hurt our economy, and commercial banks could also face a difficult operating environment”. In fact, exports are the prime engine of growth in China but now with nations pressuring China to further revaluate the yuan and putting quotas on its exports, this engine is slowing and the government is rethinking this dependency. There has been slowing investment growth as well as a heavier concentration on raising import levels, which is bringing down the contribution of net exports therefore slowing GDP growth. [/B]