Daily Morning Report 12.08.2015
The Australian dollar weakened after wage price data and a further move down by China on the yuan. The People’s Bank of China set the yuan at 6.3306 against the dollar on Wednesday, one day after the bank announced a near-2% devaluation of the exchange rate and shift to a more market-oriented central parity system. Wednesday’s central parity was 1.61% weaker than Tuesday’s fixing and the weakest since Oct. 11 2012. In Australia, the Westpac-MI Consumer Sentiment rose 7.8% to 99.5, aided by house price gains., rebounding from July when it fell to the lowest level since December last year. Also from Australia, the second quarter wage price index rose 0.6%, on track with the expected quarter-on-quarter rise and showing year-on-year growth at a record low 2.3%. AUD/USD fell 0.86% to 0.7242, while USD/JPY changed hands at 125.19 up 0.05%. Earlier, the Bank of Japan saw some members question the sustained impact of aggressive easing on the pace of yen weakening and inflation expectations in the Wednesday release of the July minutes of the nine-member board. At least two members of the board suggested that inflation expectations have either weakened or are lower, something BoJ Governor Haruhiko Kuroda told reporters after the July meeting that “some board members” were more cautious about their inflation outlook. The BoJ held policy steady at its latest meeting last week with the outlook largely stable with previous forceasts for economic recovery. At the same time, the July CGPI fell 3.0% year-on-year, above a 2.9% year-on-year drop seen and the fourth straight decline after a 2.4% fall in June. In the evening, RBA Dep Gov Philip Lowe is due to speak in Perth at 2010 (1010 GMT), on the topic National Wealth, Land Values and Monetary Policy. China is expected to report, July industrial output, retail sales and fixed asset investment data are all due at 1330 local time (0530 GMT). The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was flat at 97.23. Overnight, the dollar pared losses against the other major currencies in choppy trade on Tuesday, after data showed that U.S. unit labor costs rose more than expected in the second quarter, while non-farm productivity came in below forecasts. The U.S. Bureau of Labor Statistics reported on Tuesday that unit labor costs increased by0.5% in the three months to June, above forecasts for a gain of 0.1% and following rise of 2.3% in the first quarter. The report also said that nonfarm business sector labor productivity increased by 1.3% in the second quarter, missing expectations for a gain of 1.6%. The previous quarter’s figure was revised to a drop of 1.1% from a previously reported fall of 3.1%. The dollar has strengthened earlier in the day, after China devalued the yuan in an attempt to help exporters after a recent spate of disappointing economic data. The central bank described it as a “one-off depreciation” of nearly 2%, based on a new way of managing the exchange rate that better reflected market forces.