For Asia-Pac currencies, Thursday’s session was dominated by political nervousness in New Zealand and a busy economic calendar.
In terms of data, Japan kicked things off a little before 9am in Tokyo with the country’s latest trade figures. Export growth of 14.1% in the year to September matched market expectations, more or less. Exports have now grown by double digits on an annualized basis in four of the past five months. However, the yen was little changed in the hours following the data’s release. When last seen, the dollar was buying 113 yen.
It should be noted that Wednesday’s 0.7% climb in USD/JPY to 112.92 marked the yen’s worst one-day performance against the dollar in more than five weeks, and is suggestive that the pair will threaten October’s current high of 113.44 sometime within the next week.
In terms of global implications, certainly the most important data of the day came from China in the form of GDP. As expected, China posted solid economic growth of 1.7% in the third quarter, which equates to 6.8% in annualized terms. Stability is key according to economists, and that continues to be achieved by China’s Communist Party, led by Xi Jingping, which has now secured growth of between 6.7% and 6.9% in each of the last nine quarters.
Despite robust growth, China’s currency, the yuan, weakened along with other Asian currencies on Thursday morning, losing 0.3% of its value as USD/CNH (offshore yuan) climbed to a one-week high of 6.64.
The Australian dollar initially jumped on Thursday morning’s news that Australia’s unemployment rate had fallen to a four-and-a-half-year low of 5.5%. The monthly jobs report also showed that nearly 20,000 more people were employed in September – better than the market forecast of 15,000. However, two hours after the data’s release the “Aussie” had given back two thirds of its gains against the US dollar (0.7854) and euro (0.6656). AUD was strongest against the New Zealand dollar, against which it was holding at rates slightly above 1.1, near to five-day highs.
Strength in AUD/NZD was a reflection of broad New Zealand dollar weakness. Of the thirteen most actively traded Asia-Pac currencies, the “kiwi” was by far the weakest on Thursday. At the end of the business day in Wellington, the currency had fallen against the US dollar to 0.7093, for a loss of 0.8%.
Political uncertainty continues to weigh on New Zealand’s currency and on business sentiment in general. New Zealand is yet to form a government after September’s inconclusive election in which the incumbent National party, led by Bill English, won only 58 seats, putting it just shy of a majority in the 120-seat House of Representatives.
Since the election, the opposition Labour party leader, Jacinda Ardern, has refused to concede defeat – Labour won 45 seats – resulting in weeks of negotiations between National and Labour dealmakers and those from the smaller New Zealand First Party, with the goal of forming a coalition.
On Thursday night, New Zealand First will finally announce which party it will support in government. “The kiwi dollar will go up on National and down on Labour,” says Westpac analyst Imre Speizer.
Heading back to Asia, Thursday also saw a meeting of South Korea’s central bank, the Bank of Korea, at which interest rates were left unchanged at 1.25%. The bank continues to tread carefully as tensions with its northern neighbour remain. Rates in South Korea have been unchanged since June 2016, although it does seem only a matter of time before they are increased – BoK Governor Lee Ju-yeo has hinted as much in recent months.
Against the dollar, the Korean won has traded sideways since March within a 1110-1160 range. Because today’s BoK decision was widely expected, reactions in the won were muted. By midday in Seoul, the dollar was buying 1130 won.