🧐 ProPicks AI October update is out now! See which stocks made the listPick Stocks with AI

Australian dollar crushed between superpowers

Published 08/09/2023, 09:46 am
Updated 09/07/2023, 08:32 pm
DX
-

DXY is rampant:

DXY

AUD is clinging to its recent lows, but it cannot hold if DXY continues:

 
AUDUSD

China has thrown the kitchen sink at CNY support. It is failing:

CNYUSD

DXY has capped oil at least:

BRENT

Dirt fell:

COPPER

Miners were clobbered:

RIO

Welcome back to the Third World:

EEM

Junk did OK:

HYG

As yields eased:

YIELDS

Stocks fell:

SPX

Goldman sums it up nicely.

An attractive funding currency for carry trades with a managed and gradual depreciation against USD. CNY faced significant depreciation pressures in August, due to weakened economic data and shaky confidence in GDP growth. The surprising policy rate cut also reminded investors of large interest rate spreads, suggesting that the authorities might prioritize growth over exchange rate stability. Instead, the PBOC stepped up efforts to slow CNY depreciation via other instruments. Over the past two weeks, the authorities signaled discomfort via strong CNY fixing (i.e., a negative CCF), followed up by active CNH liquidity management, and FX deposit RRR cut. Although CNH liquidity management could be sustainable and effective to push back against one-way depreciation expectations, current conditions still suggest weakening pressures on CNY, especially as the USD strengthens. With expectations of more monetary policy easing, CNY is likely to remain an attractive funding currency for carry trades. In our client conversations, hedge fund investors have shown rising interest in riding the waves of FX interventions via CNH-CNY basis trades and NDIRS/CCS spread trades.

CNY continues to fall despite China’s best efforts to support it. As it should given the structure of China’s economy.

Worse for AUD, hedge funds are still short DXY:

USD POSITIONING

The AUD is being crushed between superpower currencies and is not over by a long shot.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.