US dollar rallies; Aussie, kiwi tumble after Chinese trade data

THE US dollar strengthened on Tuesday (Aug 8) after another disappointing set of Chinese trade figures hurt the yuan, the Aussie and kiwi, while European risk-sensitive currencies also slid on a deteriorating demand outlook.

China’s imports and exports fell much faster than expected in July, data on Tuesday showed, with imports down 12.4 per cent from a year earlier while exports contracted by 14.5 per cent, in another sign of the country’s faltering economic recovery and subdued global demand.

The offshore yuan fell to a 2-1/2 week low of 7.2350 per US dollar, while its onshore counterpart hit a more than two-week low of 7.2223 per US dollar.

The Aussie weakened by as much as 1.1 per cent to US$0.6505, its lowest since Jun 1, while the kiwi slid to US$0.6041, its lowest in two months.

“China’s imports data is another sign of weak domestic demand,” said Adam Cole, chief currency strategist at RBC Capital Markets.

“Australia is the main G10 proxy so it’s certainly not helping the Aussie,” Cole added.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

While currency moves had been minimal in the early Asian day, the greenback extended its gains over the course of the European morning as risk sentiment turned fragile and Asian and European stocks failed to ride the previous day’s Wall Street rally.

The US dollar index rose 0.5 per cent to 102.59, lifting further away from Friday’s one-week low in the wake of a mixed US jobs report which pointed to a cooling but still resilient labour market.

That added to hopes of a soft-landing scenario in the world’s largest economy, in the face of the Federal Reserve’s aggressive rate hikes.

“It’s become a wave of US dollar buying, for sure,” said Sean Callow, a senior currency strategist at Westpac.

“Perhaps the market was just expecting that there would be a more upbeat tone to risk appetite today, given US equities rallied.”

In Europe, sterling fell 0.5 per cent to US$1.2720, after a survey showed British retailers in July logged their slowest sales growth in 11 months.

The euro dropped 0.5 per cent to US$1.0953, while the risk-sensitive Swedish krona and Norwegian krone both tumbled against the US dollar.

“Both SEK and NOK have had some good sessions, when they were supported by positive risk sentiment, but are for the opposite reason slightly on the defensive,” said Jens Nærvig Pedersen, director at Danske Bank.

The US dollar firmed 0.6 per cent to stand at 143.23 yen .

Data on Tuesday showed that Japanese real wages fell for a 15th straight month in June on relentless price hikes, but nominal pay growth remained robust amid rising salaries for high-income workers and a broadening labour crunch.

“The BOJ will feel more comfortable in its message on the need for continued easing with real wages remaining weak,” said Colin Asher, senior economist at Mizuho.

All eyes are now on Thursday’s US inflation data, where expectations are for core consumer prices in the US to have risen 4.8 per cent on an annual basis in July.

“The risk is quite symmetric going into the data,” RBC Capital Markets’ Cole said.

“You could see material market reaction to either an upside or downside surprise as the data are clearly pivotal for sentiment ahead of the September and October Federal Reserve meetings,” Cole added. REUTERS