After strengthening against the yen following the election of Trump and continuing its ascent in early 2017, AUD/JPY ran out of steam. Since then the pair has traded with no obvious long-term trend. The exchange rate has fallen on political risks (particularly North Korea), while gaining when tensions subside. For this reason, the AUD/JPY exchange rate is frequently seen a barometer of global risk appetite.
The Australian dollar is currently strengthening against all major currencies except the euro. Yesterday, the aussie ended the day higher against the US dollar. Following the recent sell-off, the currency had moved into oversold territory (while the US dollar looked overbought). However, the Australian dollar's recent recovery has been fairly limited. Today's AUD/USD trading range is 0.720 - 0.7340.
Yesterday, the Australian dollar was the strongest major currency. Thanks to improving risk sentiment, emerging market currencies were stronger and commodity prices were higher. This provided a welcome boost to the aussie after a big selloff in recent history.
Looking at developments in China, Reuters reported that the People's Bank of China has banned banks in its free trade zones from certain lending activities in order to ease pressure on the yuan in offshore markets. The restrictions aim to prevent commercial banks from using some interbank accounts to deposit or lend yuan offshore, tightening offshore yuan liquidity and making it more expensive to short the currency. The move aims to support the Chinese yuan which has weakened against the US dollar for nine straight weeks. Because of Australia's significant trading relationship with China, the Australian dollar is heavily influenced by developments in China.
Turning to local news, in a speech today RBA Governor Philip Lowe talked down the Australian dollar. Lowe said that a lower further modest depreciation in the currency would be helpful to boost inflation and stimulate growth. A lower currency generally leads to higher prices of imports into the country, which puts upward pressure on inflation. It also makes exports out of the country cheaper, which helps to boost the economy. Our outlook for the Australian dollar remains bearish.
AUD/USD is up and trading just above 0.7280. EUR/AUD is flat and trading above 1.5660. GBP/AUD is down and trading above 1.7460. AUD/JPY is up slightly, and trading above 80.60.
|August 14||NAB Business Confidence JUL||7||6|
|August 15||Westpac Consumer Confidence Change AUG||-2.3%||3.9%|
|August 15||Westpac Consumer Confidence Index AUG||103.6||106.1|
|August 15||Wage Price Index YoY Q2||2.1%||2.1%|
|August 16||Employment Change JUL||-3.9K||58.3K|
|August 16||Participation Rate JUL||65.5%||65.6%|
|August 16||Unemployment Rate JUL||5.3%||5.4%|
|August 17||RBA Gov Lowe Speech|
|August 17||RBA Ellis Speech|
The Japanese yen is mixed today. The yen is weakening against the euro and the Australian dollar, while strengthening against the US dollar and the British pound. Yesterday, the yen weakened and fell against the US dollar. Notably, USD/JPY is running into sellers above ¥111.0 despite steadying risk sentiment. Today's USD/JPY trading range is 110.10 - 113.20.
Taking a look at financial markets yesterday, risk sentiment improved following news that China's vice-commerce minister will lead a delegation to the US to revive trade talks between the two countries. The news boosted risk sentiment during the Asian trading session. Sentiment was further enhanced by solid US earnings reports, supporting US stock markets. Risk currencies finished the day higher, while the safe haven yen was lower. Risk assets have come under strong selling pressure in recent history. Yesterday's recovery in 'risk on' currencies will be a a welcome relief, but the outlook for global growth remains negative. Our outlook for the Japanese yen remains bearish.
USD/JPY is currently trading above 110.70. EUR/JPY is up slightly, and trading above 126.30. GBP/JPY is down slightly, and trading above 140.80.
|August 14||Capacity Utilization MoM JUN||-2.2%||-2.1%|
|August 14||Industrial Production YoY Final JUN||-0.9%||4.2%|
|August 16||Balance of Trade JUL||-¥231B||¥721B|
|August 16||Exports YoY JUL||3.9%||6.7%|
|August 16||Foreign Bond Investment 11/AUG||¥123.9B||¥1171B|
|August 16||Stock Investment by Foreigners 11/AUG||¥-107.1B||-¥225.2B|
|August 16||Imports YoY JUL||14.6%||2.5%|
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