Bond market sell-off spooks investors
The Australian and NZ dollars were both substantially lower overnight ahead of key economic news for both currencies.
Rising bond yields across the globe were the main concern for markets, with worries about higher inflation, government spending and last week’s warning on higher interest rates from Federal Reserve Chair Kevin Warsh weighing on sentiment.
The sell-off in bond markets saw the benchmark US 10-year bond yield jump from 4.75% to 4.80%, the highest level since October last year. Longer-term US yields remain near 20-year highs.
Higher oil prices also had an impact, with renewed conflict between the US and Iran pushing oil prices up around 5.0% overnight. Brent crude hit US$95 per barrel.
US shares fell, with the S&P 500 down 0.8% and the Nasdaq down 1.0%. The US dollar gained.
The NZD/USD led losses ahead of today’s Reserve Bank of New Zealand decision at 2.00pm NZST. The RBNZ is seen as likely to hike, with a 99% chance of an increase according to Bloomberg market pricing.
The AUD/USD lost 0.3% as it extended its recent reversal from major resistance at 0.7200. Australian June-quarter GDP is due at 11.30am AEST and is forecast to rise 0.3% for the quarter, unchanged from the March quarter. Annual GDP growth is forecast to slow to 1.8% from 2.5%.
China factories regain momentum
China’s manufacturing sector gathered pace in August, with the RatingDog PMI climbing to 51.5 from 50.9 in July and comfortably beating expectations of 51.0. The survey suggested factory conditions improved more strongly than official data indicated, highlighting firmer demand and a pickup in production activity.
Export orders also strengthened, signalling better external demand, while businesses continued to add to stock levels. Hiring remained broadly steady, pointing to stable labour market conditions. With key activity indicators moving higher, RatingDog expects manufacturers to maintain a positive growth trend over the coming months.
USD/CNH remains close to its lowest level in three years. A break above the 21-day EMA at 6.7348 may lift the pair towards the 50-day EMA at 6.7548. On the downside, psychological support is located at 6.7150.
USD/SGD rebounds from losses
US Treasury Secretary Scott Bessent reportedly encouraged Japan to continue raising interest rates during talks with Finance Minister Satsuki Katayama and BoJ Governor Kazuo Ueda at the G20 gathering.
According to NHK, Bessent argued that further policy tightening would help demonstrate Japan’s commitment to improving its fiscal position and reducing reliance on ultra-low borrowing costs. The comments are likely to reinforce expectations that the BoJ could deliver another rate increase as soon as its September meeting.
USD/SGD is holding around 1% above its 28 January low of 1.2586. Near-term resistance is seen at the 21-day EMA of 1.2758, ahead of the 50-day EMA at 1.2804. On the downside, 1.2650 remains an important support level. Elsewhere, SGD/JPY has advanced to its highest level in a month.
Aussie, kiwi lower ahead of key data
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 31 August to 4 September
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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.
