Renminbi Strengthens, Yen Softens, AUD Rallies

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

Renminbi

The Renminbi strengthened to around 7.05 against the dollar, its strongest level since May 2023. This surge followed the PBoC's decision to maintain key lending rates during the September fixing, in line with market expectations.

The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, remained unchanged at 3.35%, while the five year rate, a reference for property mortgages, held steady at 3.85%. Both rates are still at record lows following unexpected cuts in July.

Externally, the Renminbi’s appreciation is also supported by a pressured US dollar, after the Fed's substantial rate cut.

Japanese Yen

The Japanese Yen softened to 143.75 against the dollar last week. This move higher came as the BoJ kept monetary policy unchanged.

Central bank governor Ueda also offered no real suggestions of tightening policy in October. As things stand, he still claims that markets are "unstable". BoJ policymakers have said that, as long as markets stay that way, they would be uncomfortable in hiking rates again.

Australian Dollar

The Australian Dollar strengthened by a further 1.6% last week against the US Dollar to trade at 0.68 on Friday. The Fed rate cut on Friday boosted the overall economic outlook and fuelled a rally in risk assets.

Data earlier last week also showed that Australian employment increased by 47,500 in August, way above forecasts of 25,000. Meanwhile, the unemployment rate stayed at a two and a half year high of 4.2%.

The Reserve Bank of Australia is expected to keep rates unchanged this week, with markets not seeing a rate cut until at least December. Some economists expect the first move to come in February or even as late as the second quarter of 2025.