The Canadian dollar managed to recoup some of yesterday’s losses overnight, but it remains under pressure due to month-end US dollar demand by portfolio managers. The Canadian dollar dropped 1.0% month-to-date in September, but it was still the best performing G-10 currency. The New Zealand dollar was the worst, losing 2.6%.
The U.S. dollar gains in September were due to a mix of risk aversion, a surge in U.S. Treasury yields, the hawkish flip by the Federal Open Market Committee, concerns that Chinese government crackdowns on domestic markets would lead to contagion in G-10 markets, and by fears rising oil prices would derail global growth.
In Asia, China Purchasing Managers Index reports were mixed. The NBS September Manufacturing PMI was 49.6 vs 50.1 in August 50.1 while the NBS Non-manufacturing PMI was 53.2 compared to 47.5 in August. The Caixin China Manufacturing PMI at 50 was better than the forecast of 49.5.
The impact from the news was minimal as Chinese traders were getting ready for the start of Golden Week holidays.
The U.S. Congress passed a bill to fun the government until December 3, which slightly improved risk sentiment.
EUR/USD is trading at the low of the overnight $1.1569-$1.1609 range. Modestly better than expected German and Eurozone employment data was not a factor, but month-end portfolio rebalancing flows weighed on the currency.
GBP/USD continues to suffer from the domestic energy crisis and a dash of uncertainty as the U.K. furlough scheme ends and traded in a $1.3417-$1.3468 range. GBP/USD appears to be oversold which suggests a bounce may be due.
USD/JPY traded in a 111.81-112.07 overnight range with prices supported by the firm U.S. 10-year Treasury yield ,currently at 1.532%, as well as month-end demand for US dollars.
AUD/USD and NZD/USD are suffering from month-end U.S. dollar demand in addition to a bout of nervousness over the weak to soft Chinese PMI data.
Today’s U.S. data includes U.S. Q2 GDP (forecast 6.6% y/y) Chicago PMI (forecast at 65) and weekly jobless claims (forecast 335,000).
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
