Asian currencies under pressure in the aftermath of Yuan devaluation
Key Notes:
- UK Rightmove HPI m/m -0.8% vs. 0.1% previously
- Japan preliminary GDP q/q -0.4% vs. -0.5%; prelim GDP price index y/y 1.6% vs. 2.2%
- Switzerland retail sales y/y -0.9% vs. -0.6%
- Eurozone trade balance 21.9bn vs. 19.3bn
- Canada foreign securities purchases 8.51bn vs. -5.95bn
- US empire state manufacturing index -14.9 vs. 5
Later
- NAHB Housing market index
- TIC Long term purchases
In the aftermath of the Yuan devaluation, the Asian currencies and their respective emerging economies are starting to shift to a market oriented exchange rate with speculation that further devaluation in various Asian currencies could be triggered. The most notable effect was the Malaysian Ringgit which fell 3.8% posting a steepest loss since 1998.
Amid the chaos, economic data from the Asian trading session saw the release of the Japan quarterly GDP print. The preliminary reading showed Japan’s GDP contracting -0.4%, down from 1% during the previous quarter. The Yen was weaker in today’s trading session was but overall trading mixed. USDJPY was testing the daily session highs above 124.5. The Aussie and the Kiwi were mixed. While the AUDUSD was weaker in today’s trading session, the Kiwi managed to gain ground lifting off from the session lows posted early in the day and reversed off the lows near 0.6533 to trade near 0.6555. As a result, the AUDNZD was also seen trending lower during today’s trading session. There were no other major news releases from the Asian session with trading being very subdued.
The European session saw a weaker Euro albeit trading flat for the day. EURUSD fell off the highs near 1.11875 in Friday’s session to post daily lows near 1.10625 earlier today. The European economic calendar was quiet with the exception of Swiss retail sales which fell -0.9%, more than expected. The Swiss Franc was muted to the news.
The British Pound was weaker today after the Cable posted gains to daily session highs near 1.5684 but failed to hold on the gains. GBPUSD was seen trading near 1.562 at the time of writing, down -0.15% for the day ahead of the US trading session open.
The US session saw the foreign securities purchase from Canada, which amounted to 8.51 billion, beating estimates of a decline to -5.95 billion. The US empire state manufacturing index declined sharply, falling to -14.9 well below estimates of 5 and down from previous month’s actual print of 3.9. The US Dollar Index was trending lower on the news as USDCAD fell from the daily session highs of 1.3148. EURUSD, which was also weaker earlier in the day managed to trim some of its losses.
The remainder of the evening is expected to be quiet with the release of the NAHB housing market index and the TIC long term purchases.
