Yen, Renminbi, AUD Strengthen Against USD

Here’s this week’s overview of the Renminbi, Japanese Yen, and Australian Dollar:

Renminbi

In China, we saw the Renminbi strengthen to 7.12 per USD last week after last week’s dovish tilt from the Federal Reserve.

Domestically, the Chinese central bank injected 300 billion Yuan through a one-year Medium-Term Lending Facility (MLF), maintaining the interest rate at 2.30% after a 20bp cut in July.

Meanwhile, markets are now looking forward to this week's Chinese PMI data for a clearer view of the country's economic health.

Japanese Yen

The Japanese Yen strengthened against the Dollar to 144.3 last week as markets stabilised further, a remarkable turnaround from multi-decade lows hit only weeks ago.

Bank of Japan Governor Kazuo Ueda’s hawkish remarks contrasted with Federal Reserve Chair Jerome Powell’s dovish stance, in a classic example of FX shifts driven by divergences in monetary policy.

On Friday, Ueda told parliament that the central bank could adjust monetary policy if its economic projections prove correct, indicating willingness to hike rates again.

Recent data pointing to robust growth and persistently high inflation supported this stance. Data showed that Japan’s core inflation rate accelerated for the third consecutive month to 2.7% in July, while the headline inflation rate remained unchanged at 2.8% for the third straight month.

Australian Dollar

The Australian Dollar gained last week by 1.75% against the US Dollar to trade at 0.679 on Friday. Minutes of the RBA’s last meeting indicated that the cash rate will stay steady for an extended period.

RBA Governor Michelle Bullock also said recently that, despite signs of easing inflation, it was still “premature” to consider cutting interest rates. She warned that inflation remains “too high” and is not expected to return to the central bank’s 2-3% target until the end of next year.