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Currencies Drop to Multiyear Lows Across Asia as Investors Rush to the Dollar

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Currencies across Asia sank to their weakest levels in years on Thursday, as surprisingly robust U.S. inflation data gave fresh impetus to a monthslong rally in the dollar.

By late afternoon Thursday in Hong Kong, the greenback had strengthened markedly against a range of currencies in the Asia-Pacific region, including those of Australia, China and South Korea.

The surging dollar partly reflects the increasing draw of U.S. assets such as Treasurys, whose yields have climbed this year. But it also signals increased wariness among investors about riskier assets. Stocks in many parts of the world have slumped as concerns build about slowing global growth and rapid inflation, coupled with the risk that forceful action by the Federal Reserve could tip the U.S. economy into recession.

“Currencies are being whipsawed by fragile sentiment,” said Wai Ho Leong, a strategist at Modular Asset Management, a Singapore-based hedge-fund manager.

Sliding currencies are a particular headache for major commodity importers and for emerging markets with large stacks of hard-currency debt to service. They also present a challenge for central banks that have to balance discouraging capital flight with sustaining growth, which would usually call for lower interest rates.

Data released Wednesday showed U.S. consumer prices rose by a faster-than-expected 8.3% in April compared with a year earlier—a reading that is likely to keep pressure on the Federal Reserve to continue raising rates by at least a half-percentage point at a time.

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