Bell FX Currency Outlook: The Australian dollar has openedlower this morning after the Chinese embarked on a majorreform of the RMB yesterday.

Australia: The AUD looked like it was going to continue on its way aboveUSD0.7400 earlier yesterday before the PBoC embarked on a majorreform of the RMB, undertaking a one-off devaluation and changing theway the fix is set. This generated a round of depreciation amongcommodity currencies, including the AUD which sold off down to the lowUSD0.7300’s. Softer NAB business survey results also added to AUD weakness. Business conditions dropped to +6 from +11 and confidencedropped to +4 from +10. The AUD weakness continued offshore withmarkets wary of the implications of China’s move yesterday and this islikely to continue in the short-term. On the day we have AustralianConsumer Confidence and the RBA’s deputy governor, Philip Lowspeaking on wealth, land value and monetary policy. Also on our radar willbe data releases out of China which include; retail sales and industrialproduction.

Majors: The USD strengthen broadly overnight as investors bought intosafe haven assets after the PBoC devalued its currency, raising concernsabout growth in the world’s second largest economy. US Treasurys andGold also benefited from the safe haven buying with investors believingthat they hold their value in times of uncertainty. China’s move to weakenits currency comes amid signals that its economy is slowing, but also asthe PBoC takes steps to make the Yuan’s value more market driven in aneffort to increase its use as a reserve currency. In contrast overnight theEUR was stronger after Greece secured a bailout agreement with itscreditors. While Equity markets were lower across the board, in particularthe companies with more exposure to China.

Economic Calendar 12 AUG

  • AU Westpac Consumer Conf Index
  • AU Wage Price Index QoQ/YoY
  • CH Retail Sales YoY
  • CH Industrial Production YoY

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