USD/CNY reverses as PBoC instructs state banks to sell USD
FX markets turned even more volatile over the last 24 hours after Chinese authorities pushed back against recent yuan weakness.
Media reports said that Chinese state banks were instructed to sell US dollars and buy Chinese yuan in a move to limit recent Chinese yuan losses that has seen the USD/CNY near the highest level since 2007.
The action saw the USD/CNY fall more than 0.5% from intraday highs – a large move for the tightly controlled onshore pair – while the more volatile offshore USD/CNH fell 0.7% from its highs.
US data turns red hot
The Chinese worries added to pressure in US markets after a sequence of red-hot US economic data caused markets to scale back expectations for interest rate cuts from the Federal Reserve.
According to Refinitiv data, markets now see rates on hold for the next ten months, with the first full cut priced in for the Federal Reserve’s June 2024 meeting.
A strong retail sales and industrial production number boosted expectations for the US economy this week, with the Atlanta Fed GDP Now measure looking for an incredible 5.8% annualised growth in the September quarter.
This upgraded view has caused bond yields to surge further – the US ten-year bond yield hit a nine-month high of 4.33% – and US shares fell further.
The US’s S&P 500 fell 0.8% overnight and is now down 5.3% from its July highs.
Aussie hit as jobs miss forecasts
The FX volatility across markets saw the AUD/USD trade in close to a one-cent range, hitting new nine-month low in the process, before later recovering to end only 0.2% lower.
The Aussie was also pressured by a drop in the July employment report, with a fall of 14.6k jobs versus expectations for a 15k improvement. The unemployment rate climbed from 3.5% to 3.7%.
The negative job news added to this week’s lower than expected wages number and confirms the Reserve Bank of Australia is likely on hold for the foreseeable future. Money markets see no change in Australian rates between now and the end of 2024.
CNY bounces after PBOC intervention
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 14 – 18 August
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.
