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Australian dollar resilient in the face of weakening yuan

Friday 8 September, 2023

Daily Currency Update

The Australian dollar was one of the best performers through trade on Thursday, avoiding an extended downturn in the face of a stronger US dollar and weaker Chinese yuan. Having tested year-to-date lows this week the AUD edged back toward US$0.64 before tracking sideways to trade near US$0.6380 on open this morning. China showed further signs of a slowdown as export and import data contracted, putting pressure on the yuan. The USD rose above the 2022 peak, marking its highest level against the CNY in 16 years. With the yuan under pressure, the AUD could have been forgiven for extending this week’s downward correction but instead maintained a tight trading range, consolidating supports at US$0.6360. Having shown resilience against a stronger USD the AUD jumped against both the GBP and euro with both European currencies suffering losses. Having slipped below €0.5950 against the euro the AUD is now trading back near €0.5970 while pushing back above £0.51 against the pound.
With little of note on today’s ticket agenda, our focus remains on China's sentiment for direction leading into the weekly close.

Key Movers

Global rates fell through trade on Thursday despite a downward correction in US unemployment/welfare claims. US jobless claims fell by 13,000 last week to their lowest level in 8 months, underpinning the narrative driving the USD higher. Strength across the labour market continues to support calls the Federal Reserve can nurse the US economy through a softer-than-anticipated slowdown. While US treasury yields moved higher after the data release the move wasn’t sustained and instead, rates moved lower. UK and German rates tracked lower too as softer UK business inflation and commentary from key European Central Bank officials had investors questioning the extent of further monetary policy tightening. While the yen pushed back against the USD amid the backdrop of lower rates the euro and GBP both retreated. The euro slipped below US$1.07 while the British pound consolidated a break below US$1.25.
With little of note on today’s ticket agenda, our attentions now turn to China's sentiment and inflation data due at the weekend for guidance and direction leading into next week’s open.

Expected Ranges

  • AUD/USD: 0.6350 - 0.6430 ▲
  • AUD/EUR: 0.5920 - 0.5990 ▲
  • GBP/AUD: 1.9400 - 1.9800 ▼
  • AUD/NZD: 1.0800 - 1.0900 ▼
  • AUD/CAD: 0.8680 - 0.8750 ▲