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Sydney - The US dollar held near a 10-month low following Friday’s dismal inflation and retail sales data. New Zealand’s currency declined after the central bank deputy governor said a weaker kiwi would help growth.
The Bloomberg Dollar Spot Index clawed 0.1% higher after its worst week since May as investors await further US economic data this week to gauge the pace of Federal Reserve rate rises.
Traders attributed the kiwi selloff to comments from the Reserve Bank of New Zealand Deputy Governor Geoff Bascand that “from a growth point of view, a lower exchange rate would help rebalance growth toward the tradables sector.”
"US CPI remains soft and other gauges, such as the PCE deflator and wage data, will be closely watched for clues about how the Fed’s normalisation path may evolve from here. Right now, the market is increasingly pessimistic," said Imre Speizer, a markets strategist at Westpac Banking in Auckland.
• NZD/USD falls 0.3% to 0.7327 versus 0.7317-0.7361 range.
• AUD/USD declines 0.3% to 0.7812, pressured initially on profit taking by leveraged.
• Aussie longs versus kiwi which were trimmed ahead of China data.
• AUD/NZD cross up 0.1% at 1.0655 after losing as much as 0.2% earlier Bloomberg Dollar Spot Index rises 0.1% to 1173.25 after skidding 0.7% Friday; fell 1.3% last week, its worst week since May.
• Hedge funds and other speculators last week took out the strongest net-short dollar stance since February 2013 after Fed Chair Yellen’s congressional testimony sent the greenback to a 10-month low on Friday.
• Still, since mid-2013, this level of bearishness has tended to precede an unwinding and a fresh bullish phase; coincidentally, the 14-week RSI for the Bloomberg Dollar Spot Index has fallen below an oversold threshold of 30 for the first time since 2011.
• USD/JPY up 0.1% to 112.64 after China’s 2Q GDP rose 6.9% in 2Q y/y versus est. 6.8%.
• China June industrial production rose 7.6% y/y vs est. 6.5%.
• Shanghai and Shenzhen benchmark stock indices plunged after a closed-door meeting of policy makers over the weekend signalled ongoing deleveraging in the financial sector may expand.”
• The weekend meeting put a damper on risk appetite and comments from there suggest China is unlikely to loosen its grip on financial deleveraging in the second half, opposite to what many had expected earlier,” said Wang Chen, Shanghai-based fund manager with Xufunds Investment Management.
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