Asian markets face ugly open on Monday as traders try to shield from fallout from Friday's rout

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Asian markets face ugly open on Monday as traders try to shield from fallout from Friday's rout

Jamie McGeever took a look at the day ahead in Asian markets as a result of Reuters -- A look at the day ahead.

Expect an ugly open to Asian markets on Monday as investors try to shield themselves from the fallout from the widespread selling of battered stocks, bonds, and currencies on Friday.

The Fed's drive to raise rates higher than most people had bargained for, and the effect that is having on global rates, was the main cause of the historic rout in UK bonds and sterling on Friday.

The dollar's 'wrecking ball' status is 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 lowest levels since mid- 2020, the Thai baht slumped to a 16 year low, and South Korea's won hit a 13 year trough.

Inflation pressures increase, forcing policymakers to turn more hawkish, tightening financial conditions, and crushing demand. Central banks will find it hard to break out of this doom loop.

Their pool of FX reserves is limited for intervention purposes - even the Bank of Japan will be aware its $1.3 trillion stash won't last forever if it follows last week's historic dollar-selling intervention often enough.

When Asian central banks sell chunks of their U.S. Treasuries holdings to support their domestic currencies, the U.S. yields rise, investors pile in and the dollar strengthens, and the dollar is more attractive.

A set of Japanese economic data, including retail sales and consumer confidence, and China's September PMIs, will give an insight into the health of the region's two largest economies at the end of the week.

Key developments that could give more direction to markets on Monday: