Aussie, kiwi sink as China's recovery falters; yuan eases on surprise rate cut
By Kevin Buckland
TOKYO, Aug 15 (Reuters) - The Australian and New Zealand dollars retreated from near two-month highs on Monday after a new batch of dissappointing data from China, a key trading partner, while the yuan weakened following a surprise rate cut.
The greenback edged higher as traders continued to hawkish comments by Federal Reserve policymakers' against signs that U.S. inflation may have peaked.
The U.S. dollar index =USD , which gauges the currency against six major peers, edged 0.04% higher to 105.74, consolidating near the middle of its range this month.
The onshore yuan CNY=CFXS eased to a one-week low of 6.7620 per dollar, compared with the previous close of 6.7430, after the People's Bank of China unexpectedly lowered borrowing costs on medium-term policy loans and a short-term liquidity tool for the second time this year.
New Zealand's kiwi NZD=D3 slumped 0.6% to $0.64165, pulling away from Friday's high at $0.6468, the strongest level since June 8.
The Aussie slid 0.58% to $0.70805, falling further away from the recent peak last Thursday, when it struck the highest since June 10 at $0.7136.
Chinese industrial output, retail sales and fixed-asset investment all fell short of analyst estimates on Monday, as a nascent recovery from draconian COVID-19 lockdowns faltered.
"Despite the warning of inflation risk and flush liquidity conditions, the dominant downside risks from the COVID spread and property-sector rout prompted the PBOC to cut rates to stimulate demand," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.
Meanwhile, U.S. data on Friday showed the first decline in import prices for seven months, following statistics earlier in the week that showed consumer and producer prices also cooling.
That has fueled investor hopes for less aggressive Fed tightening, despite Richmond Fed President Thomas Barkin joining the chorus of hawkish rhetoric by telling CNBC on Friday that he would like to see inflation running at the Fed's 2% target for "some time" before stopping rate hikes, adding there's "still more to come to get into restrictive territory."
Analysts will scour minutes of the Fed's most recent meeting, due to be released on Wednesday, for more clues on policymakers' thinking, while retail sales data on Friday will give some fresh insight on the economy's health.
"A growing narrative of a soft landing has taken hold, gaining traction after some easing in price indicators, with some interpreting that as allowing the Fed to ease up on the pace of hikes," Tapas Strickland, a markets economist at National Australia Bank, wrote in a client note.
The minutes are a risk though, and "may push back on the notion of a Fed pivot," Strickland said.
Money markets now price 44.5% odds of another 75 basis-point rate hike by the Federal Open Market Committee in September, versus 55.5% probability of a slowing in the pace of tightening. FEDWATCH
The euro EUR= eased 0.1% to $1.02475, weighed down by Europe's struggles with the war in Ukraine, the hunt for non-Russian energy sources and a hit to the German economy from scant rainfall.
Sterling GBP= slipped 0.14% to $1.21185.
Against the yen though, the dollar sank 0.27% to 133.225 JPY=EBS amid an easing in long-term U.S. Treasury yields.
Leading cryptocurrencies bitcoin and ether rose back toward more than two-month peaks, with a much-delayed upgrade to the latter's network all but certain to happen in September.
Ethereum's so-called "merge" promised a 99.95% reduction in the blockchain's energy consumption, preparing it for faster transactions.
Bitcoin BTC=BTSP last rose 2.11% to $24,833, after earlier touching $25,212 for the first time since June 13.
Ether ETH=BTSP gained 1.81% to $1,971.90, approaching Sunday's peak of $2,031.56, the highest since May 23.
World FX rates Link
Reporting by Kevin Buckland; Editing by Simon Cameron-Moore
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.