Renminbi Rises, Yen and Aussie Dollar Falter in FX Shift

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

Renminbi

The Renminbi strengthened past 7.08 per dollar, extending its gains for a second consecutive week and reaching its highest level since June 2023, mainly driven by robust corporate demand for the Chinese currency.

The surge in dollar selling by Chinese companies could intensify in the short term, potentially triggering a herding dynamic that further boosts the currency.

Expectations of US Federal Reserve interest rate cuts may also have contributed to the Renminbi’s appreciation, even if those expectations have been tempered of late.

Over the month, the Renminbi is on track to gain nearly 2%, marking its best performance since December 2023. 

Japanese Yen

The Japanese Yen depreciated past 146 per dollar, hitting a near two-week low and facing pressure from a stronger dollar as the latest US inflation reading prompted traders to pare bets on an aggressive Federal Reserve rate cut.

Markets now await a crucial US monthly jobs report this week as the Fed's attention moves from inflation to the labour market.

Domestically, investors digested data showing Japanese companies increased capital expenditure by 7.4% in the second quarter, the 13th consecutive quarter of growth.

The country’s manufacturing PMI was also revised slightly higher to 49.8 from 49.5 in August, moving closer to stabilization.

On the monetary policy front, Bank of Japan officials recently indicated that they are ready to raise interest rates again if the outlooks for the economy and prices are realised.

Australian Dollar

The Australian Dollar dropped last week by 0.4% against the US Dollar to trade at 0.676 on Friday.

Domestically, investors digested data showing Australia’s manufacturing sector extended its slump in August as high borrowing costs and subdued demand weighed on new orders.

On the monetary policy front, markets look forward to the latest remarks from Reserve Bank of Australia Governor Michelle Bullock this week. She said recently that despite signs of easing inflation, it was still “premature” to consider cutting rates.