– Risk sentiment turns positive with JPY rally.
– PBoC pushes back against USDCNY gains.
– US dollar gives back some gains-AUD outperforms.
USDCAD: open: 1.3596, overnight range: 1.3587-1.3640, close 1.3640, WTI $87.00, Gold 1925.49
The Canadian dollar started strong in Asia and continued to gain steadily into the NY opening. These gains were attributed to a modest improvement in global risk sentiment following verbal intervention by the Bank of Japan (BoJ) Governor and actions taken by the People’s Bank of China (PBoC) to weaken USDCNY.
BoJ Governor Kasuo Ueda made a concerted effort to push USDJPY lower when he suggested that an end to negative interest rates might be on the horizon. Mr. Ueda mentioned that policymakers could potentially gather enough information by year-end to determine whether wages and prices would continue to rise, making an end to negative interest rates a viable option. The news caused USDJPY to plummet, affecting the rest of the G-10 currencies positively.
The PBoC deliberately set the USDCNY fixing level 0128 points below the spot USDCNY rate as part of its ongoing efforts to bolster its currency. Additionally, Chinese inflation inched up, rising 0.1% in August compared to July’s -0.3%. This increase in the inflation rate has raised hopes that the 1-year Medium Loan Financing rate could be trimmed as early as this Friday, although this is not the consensus among experts.
While it might be tempting to attribute some of the Canadian dollar’s gains to better-than-expected Canadian employment data released on Friday, this is not the case. The Canadian dollar actually weakened, despite Statistics Canada reporting a gain of 39,900 jobs in August. One contributing factor is the weakness in the job details: the private sector lost 22,700 jobs, while the public sector gained 13,200, and self-employment rose by 49,200.
Interestingly, the Canadian dollar seems unaffected by movements in oil prices. West Texas Intermediate (WTI) traded quietly within a range of $86.72 to $87.38 per barrel
EURUSD traded in a 1.0708-1.0741 band with prices tracking broad US dollar sentiment ahead of Wednesday’s US inflation report and Thursday’s ECB monetary policy meeting.
GBPUSD climbed to 1.2538 from 1.2466 then slipped to 1.2513 in NY do to the improved global risk tone.
USDJPY churned in a 145.91- 147.82 band following the BoJ Governors verbal intervention. Prices climbed off the low in the wake of higher US Treasury yields.
AUDUSD rallied from 0.6377 to 0.6443 because of higher Chinese inflation and the better tone in global risk sentiment.
There are no US or Canadian economic reports today.