Renminbi Weakens, Yen Rises, Aussie Dollar Under Pressure

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

Renminbi

In China, we saw the Renminbi weaken to 7.27 against USD last week.

A series of disappointing Chinese economic indicators dampened market sentiment with China reporting slower than expected growth in Q2 of 2024 amidst an extended property market downturn and concerns over employment.

This heightened expectations that Beijing might implement additional stimulus measures, which were confirmed on Monday when the central bank lowered its main short term policy interest rate from 1.8% to 1.7%, the first cut for twelve months.

President Xi Jinping stressed the importance of lifting restrictions and implementing effective regulations to boost growth during the week.

Markets, however, remain unconvinced over the stability of the Chinese economy with sentiment remaining that stimulus must go further to pull the country out of a slump.

Japanese Yen

The Japanese Yen ended the week trading at 157.3 against the US Dollar, a second consecutive week of appreciation.

Data showed that Japan’s headline inflation rate remained unchanged at 2.8% in June, while the core inflation rate rose to 2.6% from 2.5%.

Despite being slightly less than market forecasts of 2.7%, the latest core reading reinforced market expectations that the Bank of Japan could raise interest rates from current near-zero levels when it meets on July 30-31st.

The Yen is up nearly 3% from a 38-year low of 161.95 per dollar touched in early July amid a suspected government intervention in the FX market.

BoJ data suggested that authorities may have bought nearly 6 trillion yen on July 11-12th, with a follow-up operation likely conducted on July 17th.

Australian Dollar

The Australian Dollar was under pressure last week and weakened 1.54% against the US Dollar to trade at 0.666 on Friday.

Job additions in Australia for June were stronger than expected, but the overall unemployment rate edged up to 4.1% from 4%, pointing to more dovish monetary policy conditions.

A sharp decline in energy and metals prices also weighed on the currency and probably account for most of the drop.

Australia’s economy relies heavily on commodity exports, making the Aussie particularly sensitive to movements in commodity prices.