Dollar Ends Mixed, Up Against JPY, CAD, Asia / EMFX; down against NZD, AUD, GBP
Soft Chinese data weighs on Asian currencies; NZ CPI Jump Lifts Kiwi, DXY Flat
Summary: Weaker-than-expected Chinese economic data weighed on risk appetite and Asia / EMFX in Asian trade. Later in the trading day, industrial production and capacity utilization in the United States in September both missed expectations, with lower readings. The Dollar Index (USD / DXY), which measures the value of the greenback against a basket of 6 major currencies, ended at 93.95 (93.95). The British pound, which hit a one-month high of 1.3773 over the weekend, fell to 1.3730 at the end of New York. Yesterday the British currency opened at 1.3745. The Kiwi (NZD / USD) stood higher at 0.7085 from 0.7067 yesterday. A surge in New Zealand’s Q3 CPI to 2.2% from 1.3% in Q2 propelled the Kiwi to 0.7105, near 5-week highs. The euro edged up to 1.1610 from 1.1600 after slipping to an overnight low of 1.1572. Oil prices retreated after hitting multi-year highs. This brought the pair USD / CAD (US dollar vs. Canadian dollar) to 1.2378 (1.2363). Weaker-than-expected Canadian housing starts also weighed on the loonie. The Australian dollar was little changed at 0.7415 (0.7420). Against the Japanese yen, the greenback extended its lead to 114.32 from 114.25. Asian and emerging market currencies were mostly weaker against the US dollar. USD / SGD rallied to 1.3495 from 1.3480 while USD / THB (Thai Dollar-Baht) stood at 33.47 (33.37 yesterday). Against the Chinese offshore yuan, the US dollar (USD / CNH) dipped to 6.4290 from 6.4300.
Wall Street shares were mixed. The DOW closed at 35,250 (35,297) while the S&P 500 climbed to 4,485 from 4,472 yesterday. Global bond yields edged up. The 10-year US Treasury bond rate rose two basis points to 1.59%. The 10-year German Bund yield stood at -0.15%, up two basis points from -0.17% yesterday. The yield on UK 10-year gilts rose to 1.13% (1.10%). The yield on the 10-year JGB in Japan closed at 0.08% (0.07%). The 10-year Australian Treasury yield jumped 11 basis points to 1.74%.
Data released yesterday saw China’s Q3 annual GDP drop to 4.9% from Q2’s 7.9%, estimates missing at 5.0%. China’s retail sales in September rose 4.4% from 2.5%, beating expectations at 3.5%. Chinese investment in property, plant and equipment in September slipped to 7.3% from 8.9% and below expectations of 7.9%. Chinese industrial production slowed to 3.1% (y / y) in September from 5.3% in August, and below median forecast at 3.9%. Housing starts in Canada in September (y / y) slipped to 251,200 from 260,000 and lower than forecast at 265,000. US industrial production in September slipped -1.3%, the missing estimates to 0. 3% and below the August downward revision of -0.1%. The capacity utilization rate in the United States in September fell from 76.2% to 75.2%, with the missing estimate being 76.6%.
- NZD / USD – The Kiwi settled at 0.7085 after peaking yesterday at 0.7105, a nearly 5 week high before slumping at the end of New York at 0.7085 and an open of 0.7068 . New Zealand’s third quarter CPI spike pushed the Flightless Bird higher against the greenback.
- GBP / USD – The British pound rallied against the US dollar to 1.3773 after Bank of England Governor Bailey said the recent surge in energy prices risked raising inflation expectations. Bailey was speaking at a virtual seminar on G30 international banks. GBP / USD fell to 1.3730 from yesterday’s open at 1.3745.
- USD / JPY – The dollar extended its lead against the Japanese yen, supported by higher yields on US Treasuries. USD / JPY closed at 114.32 (114.25 open yesterday) after hitting an overnight high of 114.45.
- AUD / USD – The Aussie Battler came in at 0.7415 from yesterday’s open at 0.7420. Overnight, AUD / USD slipped to as low as 0.7378 before rebounding towards its New York close. The overnight high traded for the Aussie was 0.7437.
On the lookout: Today’s economic calendar is light. The release of the minutes of the Australian RBA’s monetary policy meeting (11:30 am Sydney) kicks off today’s schedule. Switzerland then publishes its September trade balance (Surplus f / c + CHF 6.23 billion against CHF 5.06 billion previously). Bank of England Governor Philip Bailey is expected to speak at an online climate change conference jointly hosted by the Bank of England and the Bank of Italy. The United States publishes its September building permits (m / mf / c 1.68 million against the previous 1.721 million – ACY Finlogix) and housing starts in the United States in September (m / mf / c 1, 62 million against 1.615 million previous – ACY Finlogix). New Zealand releases its World Dairy Trade Price Index early tomorrow morning (2:30 am Sydney). No forecast given, the previous one was 0.0%.
Commercial perspective: Risk sentiment weakened yesterday as the rise in energy prices continues unabated. Stocks struggled with the drop in Asian stocks yesterday. Overnight, Wall Street was mixed with the DOW falling while the S&P 500 edged higher. In currency markets, the US dollar was mixed against various rivals despite a stable dollar index (USD / DXY). The Kiwi, the British Pound and the Euro advanced against the Greenback. The Aussie remained unchanged. The US dollar rose against the Japanese yen and most Asian / EMFX pairs. Today’s economic calendar is light. However, various global central bank executives are expected to speak at several international virtual events. This should keep traders busy in an otherwise light economic calendar day. Consolidation will dominate early currency trading in Asia.
- USD / JPY – USD / JPY continued to climb, settling at 114.32 (114.25 yesterday). Overnight the USD / JPY traded at highs of 114.45 which are near the 3 year highs. For today, expect immediate resistance at 114.50 to halt any strong advance. The next level of resistance can be found at 114.80 and then 115.10. Immediate support stands at 114.00 (overnight low traded was 114.01). The next level of support can be found at 113.70. The Japanese currency was also weaker against most of the majors. Japanese officials have so far been quiet. However, any other pronounced weakness in the yen may invite some form of verbal intervention from the BOJ. Probable range today 113.70-114.70. You prefer to sell USD / JPY rallies.
- GBP / USD – The British pound stood at 1.3730 US dollars, slightly lower than yesterday’s open at 1.3745. Overnight GBP / USD traded high at 1.3765. For today we can find immediate resistance at 1.3770 followed by 1.3800. Immediate support is at 1.3700 (overnight low traded was 1.3709). The next level of support is found at 1.3670. Bank of England Governor Philip Bailey is due to speak at a joint Bank of England and Bank of Italy virtual conference. We could see more fireworks. Probable range today, 1.3680-1.3780. Just swap the range shag on this one today. The UK released its CPI and PPI data on Wednesday, which could be crucial for the UK currency’s next move.
- AUD / USD – The Australian Battler ended little change against the greenback at 0.7415 (0.7420 yesterday). Overnight AUD / USD peaked at 0.7437. Immediate resistance can be found at 0.7440 followed by 0.7470. On the downside we can find immediate support at 0.7380 (overnight low 0.7378) followed by 0.7350. Traders will focus on releasing the latest minutes from the RBA monetary policy meeting today. The AUD / USD pair traded on the margin, gradually advancing against the greenback and other rivals. Look for a likely range today of 0.7370-0.7440. Prefer to sell rallies, we could head south then on this currency pair.
- NZD / USD – The Kiwi stood at 0.7085 after trading at 0.7105 yesterday following the rise in New Zealand’s third quarter inflation report. The yield on New Zealand 10-year Treasuries jumped to 2.41% from 2.24% yesterday. It’s huge. Still, the NZD / USD pair eased. For today, the Kiwi’s immediate resistance stands at 0.7110 followed by 0.7140. Immediate support can be found at 0.7050 (overnight low traded was 0.7049). The next support level is at 0.7020. The Kiwi will struggle to trade much higher today. Looking to sell rallies in a likely range between 0.7035 and 0.7105 today.