Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
China action drives sharemarket surge
Asian FX markets ended at highs on Friday after a super-charged equity rally swept through the region.
Chinese stocks had their best one-week performance since 2008 with the Shanghai Composite up 8.6% last week while Hong Kong’s Hang Seng was up 14.7% over the week – Hong Kong’s best weekly performance since 1998.
Regional sentiment was boosted by a sequence of moves from Chinese authorities last week including changes to the Reserve Ratio Requirement (RRR) and cuts to the benchmark medium-term lending facility.
The AUD/USD gained 1.6% last week to close at 18-month highs.
The NZD/USD ended 1.9% higher for the week to finished at the 2024 highs.
The USD/SGD fell 0.8% last week to close at ten-year lows.
The USD/CNH fell 0.8% to end at the lowest level since May 2023.
CNY at 16-month highs ahead of PMIs
China official manufacturing PMI will be closely watched today at 11.30AM AEST
We anticipate a little increase in the official manufacturing PMI from 49.1 in August to 49.2 in September. A non-seasonally adjusted leading indicator of the official PMI in China, the Emerging Industries PMI (EPMI) rose by 4.5 points to 53.3 in September from 48.8 in August.
Despite this improvement, the EPMI is still well behind its historical September average of 54.9 for 2014–23, excluding 2020–22 (because to Covid distortions).
Nonetheless chart shown that China still maintains its global position in the manufacturing sector, despite gradually shifting its economic model from export oriented to consumption driven.
CNY hit the strongest level against the USD in over 16 months following the slate of stimulus by PBOC. The pair fell below 7.0000 early last Wednesday morning in Asia.
Looking forward, 6.9000 is the short-term support level and 7.10 is the next significant resistance level for USD/CNY.
US jobs key this week
FX markets will be driven by central bank decisions and key economic data releases this week, with particular attention on manufacturing PMIs, inflation figures, and labor market reports from major economies.
The week begins with the Bank of Japan’s Tankan survey (see chart), followed by a series of manufacturing PMI releases across Asia and Europe. Later in the week, services PMI data and the US jobs report will be closely watched.
Inflation readings from the Eurozone will provide insights into global price pressures, while Australia’s trade balance and retail sales data could impact AUD movements.
In the United States, the ISM manufacturing and services indices, along with the September employment report, will be crucial for USD direction and Fed policy expectations.
Chinese drives regional surge
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 30 September – 4 October
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
