Expect an ugly open to Asian markets on Monday as investors try
to shield themselves from the fallout from the widespread selling
that battered stocks, bonds, and currencies on Friday. The historic
rout in UK bonds and sterling took center stage on Friday but at the
heart of the gloom shrouding world markets is the Fed's drive to raise
rates far higher than most people had bargained for, and the effect that
is having on global rates. And the dollar. The dollar's 'wrecking ball'
status is being painfully felt in Asia, where several currencies have sunk
to multi-year or record lows, and central banks have intervened to try
and stop the rot. On Friday, India's rupee hit a record low, Indonesia's
rupiah and China's yuan fell to their weakest levels since mid-2020, the
Thai baht slumped to a 16-year low, and South Korea's won hit a 13-year
trough. Falling currencies increase inflationary pressures, forcing
policymakers to turn more hawkish, tightening financial conditions, and
crushing demand. Central banks will find it hard to break this doom loop.