China was once again a focus with Hong Kong’s Hang Seng index plunging again, on approach to 20% down from its high in January this year. After falling circa 2% it has found support and as I post its only down around 1% on the day. Rumours are circulating that Chinese authorities have told funds and banks not to sell stocks. While I haven’t confirmed this information at this stage such instructions are not unusual at all in China. It’s a one-party state and the Chinese Communist Party is very accustomed to getting its way. Of course, bullying investors is only a short-term solution and really only locks in deeper malaise over time.

The People's Bank of China set the USD/CNY reference rate nearly 10 big figures under the estimated (modelled) rate, its most aggressive setting divergence in this episode of yuan weakness so far and a sign the Bank want to slow the descent of the currency.

Apart from China, the other notable event was the July jobs report from Australia. This was a poor one, with 24K full time job losses and the unemployment rate climbing to 3.7% vs. 3.5% expected. The Australian Bureau of Statistics warned of holiday-time distortion in the data (see bullets above) but headlines are headlines for a reason and AUD/USD was marked lower immediately on the job loss and unemployment rate numbers. At its session low it was down around 60+ points on the day. NZD/USD is lower alongside.

EUR and GBP are lower against the USD also. A little more hawkish tone from the FOMC minutes publicised on Wednesday saw UST yields rise further here in the region and thus weigh on ‘risk’. USD/JPY ticked higher, popping above 146.50 at one stage and is just under there as I update.

Asian equity markets:

  • Japan’s Nikkei 225 -0.9%

  • China’s Shanghai Composite -0.2%

  • Hong Kong’s Hang Seng -0.9%

  • South Korea’s KOSPI -0.6%

  • Australia’s S&P/ASX 200 -0.9%

audusd wrap chart 17 August 2023