Global overview
The greenback tumbled overnight, with the USD index falling from six-month highs, as the PBOC and BoJ both pushed back against recent weakness. The Aussie and kiwi both gained strongly.
Yuan jumps after fix discount
The Chinese yuan and Japanese yen bounced from major lows yesterday after both the People’s Bank of China and Bank of Japan drove reversals in these markets.
In China, the PBOC’s daily USD/CNY fix saw the largest discount against market forecasts on record – at 7.2148 versus a market projection at 7.3437 – in a sign that Chinese authorities are becoming increasingly concerned about a weakening Chinese yuan.
The offshore USD/CNH ended yesterday down 0.9%.
An improvement in Chinese new loan growth, continuing a recent run of better data after stronger trade and inflation numbers last week, also helped the Chinese yuan.
The USD/JPY saw a sharp drop as well, down 0.5%, after Bank of Japan governor Kazuo Ueda said over the weekend that the central bank might have enough data by year-end to start lifting interest rates and end its negative interest rate policy.
Aussie boosted by USD weakness
While the move boosted the yuan and yen, it also pushed the greenback lower.
The US dollar was lower across Asia with the greenback’s weakness continuing into the overnight session.
The AUD/USD surged higher, jumping from nine-month lows, to gain 0.9%.
The kiwi was also higher, with the NZD/USD up 0.7%.
The euro and British pound also jumped from recent lows versus the US dollar.
GBP to be tested by jobs, GDP
The British pound’s overnight rally will be tested over the next few days with key data due from the UK.
While the GBP gained versus the greenback last night, the pound has been weaker in other markets, with the AUD/GBP notably climbing to one-month highs overnight.
Financial markets are now less convinced the Bank of England will need to lift rates further with only one more rate hike fully priced in and the terminal rate seen at 5.50%. Two months ago, markets were looking for the BoE to end its hiking cycle at 6.50%.
Tonight, UK employment and on Wednesday, July GDP numbers, will provide more detail on the UK’s growth outlook – weaker numbers might hit the pound.
Yuan, yen leap from lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 11 – 16 September
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.
