After three consecutive days of devaluation, the yuan stabilized, according to the reference rate set by the PBOC. This provides some calm for financial markets. We could potentially see stock markets end a turbulent week with a smile.
Yet for the most sensitive currencies, this doesn’t help too much. They have trouble of their own.
AUD/USD
The Australian dollar is still below 0.74. This comes after strong employment data and a less worried RBA. But this probably belongs to the past.
The fresh word from Christopher Kent of the RBA is that the economy is still growing at a modest pace and that there is lots of spare capacity. This isn’t very encouraging.
NZD/USD
The kiwi is well off the recovery highs, and now trading at 0.6550 – a historic low. Data in New Zealand remains weak.
Retail sales advanced only by a symbolic 0.1%, and so did core sales. Expectations stood on 0.5% and 0.7% respectively. Adding insult to injury, the data for Q1 was revised to the downside with the headline number rising only 2.3% against 2.7% initially reported.
All in all, the temporary relief in China hasn’t helped these currencies. When worries erupt again, as early as next week, we could see further declines in both antipodean currencies.
More: Don’t Buy AUD Around Current Levels – Credit Agricole
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