Ahead of major announcements in the coming days, investors were in surprisingly good spirits on Wednesday, indicated by a stronger New Zealand dollar, won, rupee and a faltering yen.
Weakness in Asia-Pac FX would have been forgiven ahead of Thursday’s announcements by the FOMC (Wednesday in the US and Europe), Bank of England and Donald Trump, who announces his decision on the next Federal Reserve Chair; not to mention Friday’s US payrolls data.
The South Korean won climbed to a seven-week high against the dollar on Wednesday (a USD/KRW low) of 1123.3 after third-quarter GDP data showed South Korea’s economy growing at its fastest pace in seven years. Third-quarter growth of 1.4% was well above the median estimate of 1.0% and an improvement on second-quarter expansion of 0.6%.
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.
The week ahead should be an interesting one for Asian financial markets, with the highlights being China’s 19th National Congress, the latest numbers for Chinese economic growth, the Bank of Korea’s monetary policy meeting and Japanese trade data.
Further to that, and to the events outlined below, investors should look with care to Federal Reserve speakers on Sunday and Wednesday (Asian time zones) and to Tuesday’s US data for industrial production, all of which may influence risk appetite and, of course, the dollar side of Asian FX pairs.
Currencies in Asia have begun the week slowly and also with contrasting performances against the FX majors.
Against the dollar, while all of Asia’s ten most active currencies have fallen marginally on Monday morning, many hold slight gains or remain unchanged against the euro. Little movement has been seen against the yen.
Currencies in the Asia-Pacific region fell against the US dollar on Thursday morning after the Federal Reserve signaled that it would raise interest rates again this year and would begin shrinking its balance sheet in October. The Fed funds rate was left unchanged at its current range of 1–1.25%.
Although the majority of economists had expected this would be the Fed’s position, for some, doubt had crept in following hurricanes Harvey and Irma.
To the surprise of many, the Bank of Canada raised interest rates on Wednesday to 1.0%, from 0.75%, which sent currencies in the Asia-Pacific region tumbling against the Canadian dollar.
The Bank of Canada had been expected to raise the cost of borrowing again this year, following a quarter-point hike in July, but most analysts had been predicting a move in October.
A better than expected Chinese manufacturing PMI failed to lift the yuan or Australian dollar on Thursday morning against a US dollar determined to end the month in the green.
The Chinese PMI for the manufacturing sector came in at 51.7 for August, slightly ahead of the market forecast of 51.3 and July’s reading of 51.4.