Yen Gains, Renminbi Holds Steady Amid Mixed Economic Signals

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

Renminbi

The Renminbi remained steady at 7.08 against the US dollar last week as the dollar continued to retreat following US jobs data.

Traders, however, remain cautious on pushing the Renminbi higher following a recent statement from the People's Bank of China, which indicated that policymakers still have room to lower the reserve requirement ratio for banks, which was taken as indicating regulatory concern over the health of the financial system in China.

Meanwhile, earlier in the week, a private survey showed China's services sector grew at a slower pace in August 2024, missing expectations despite a seasonal boost from summer travel while the same survey also revealed a glimmer of optimism in the manufacturing sector, which showed stabilisation in August.

Market observers have pointed to massaging of China’s economic data and suppression of unwelcome news, along with Foreign Direct Investment reaching a record net outflow. These are indicators of underlying, and under-appreciated, economic strains that could portend pressures on the currency in the medium term.

Japanese Yen

The Japanese Yen strengthened to 142.1 against the dollar last week, a 2.5% appreciation. PMI data showed manufacturing posting a slight contraction with services expanding once again.

Household spending dropped more than expected in July but an increase in foreign exchange reserves and a weaker dollar helped to support the Yen later in the week.

Australian Dollar

The Australian Dollar dropped by 1.4% last week against the US Dollar to trade at 0.666 on Friday. A weakening global picture with falling commodity prices pressured the Aussie last week as fears of a recession increased.

The RBA remains hawkish so a lot will depend on upcoming data and central bank rate decisions in the coming weeks with markets seemingly turning negative on the Australian currency.