China's yuan falls as COVID-19 situation is getting worse

The Chinese yuan was considered one of the worst performers in the market among Asian currencies this week. It saw a decline of 0.6%, which was fuelled by a return of several major cities to strict lockdown rules. The Chinese economy is currently struggling with the highest daily COVID-19 cases.

Meanwhile, some Fed officials said slower pace of interest-rate increases would allow policymakers to judge progress on their goals. The central bank is expected to raise interest rates by 50 basis points next month. When delivering later increases, it is likely to rely on the further U.S. inflation data.

Hopes for a less aggressive pace of rate hikes have a positive impact on Asian currencies. It gives local financial regulatory authorities more opportunities to tighten monetary policy and catch up with the Fed's hikes. However, there is an element of uncertainty in markets over when the Fed's benchmark rate will peak.