Aussie surges after work surprise; China’s yuan is rising

SINGAPORE, July 20 (Reuters) – The Australian dollar surged on Thursday after the country’s jobs data bettered market expectations, while the yuan marched higher after China’s monetary authorities stepped up efforts to defend its weakening currency.

Australian employment easily beat expectations for the second month in a row in June, figures showed on Thursday, as net employment rose by 32,600 from May, beating market forecasts for a rise of 15,000.

Its jobless rate also held near a 50-year low, in a sign of labor market resilience that could threaten further rate hikes by the Reserve Bank of Australia (RBA).

That boosted the Aussie and sent it up nearly 1% to an intra-day high of $0.6840 in Asia trade, taking the New Zealand dollar with it.

The kiwi was last 0.63% higher at $0.6303, with both Antipodean currencies on track to reverse a four-session losing streak.

“The Australian dollar edged higher across the board after the economy delivered another rate-hike defying report,” said Matt Simpson, senior market analyst at City Index.

“Ultimately, it’s another strong set of jobs numbers that keeps pressure on a data-dependent (Reserve Bank of Australia) potential rate hike in August.”

In Asia, China left its lending benchmarks unchanged on Thursday, as expected, although its central bank said in a statement it raised a parameter on cross-border corporate financing under its macro-prudential assessments to 1.5 from 1.25. The ratio dictates the maximum that any company can borrow as a proportion of its net assets.

The move is intended to make it easier for domestic companies to raise funds from overseas markets, which comes at a time when the Chinese yuan faces downward pressure as the country’s economic recovery falters.

Allowing more capital inflows could ease pressure on the currency.

The rise signaled the People’s Bank of China’s policy guidance to “defend the (yuan) and curb excessive forex volatility at the same time as the CNY’s strong fixing bias”, said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Sources also told Reuters on Thursday that China’s major state-owned banks were seen selling dollars to buy yuan in the offshore spot market in early Asian trading.

The yuan jumped in onshore and offshore markets following the developments, both gaining more than 0.5% against the US dollar.

The offshore yuan was last about 0.7% higher at 7.1840 per dollar, while the onshore yuan last traded at 7.1770 per dollar, having earlier hit a session-high of 7.1620.

“(It’s) a one-two punch driving (the yuan) firmer and supporting sentiment,” said Christopher Wong, a currency strategist at OCBC.

But the move could be short-lived and the yuan could weaken again if frustration over the lack of economic stimulus from China grows, he added.

CHECK RATES

In the broader currency market, the US dollar was on the back foot, even straying from its recent 15-month low.

Sterling nursed deep losses after a sharp fall in the previous session following Britain’s inflation data, which fell short of market expectations.

The pound was little changed at $1.29385, after sliding more than 0.7% on Wednesday.

That inflation reading offset market expectations of more aggressive rate hikes from the Bank of England (BoE), with the prospect of Britain’s rates rising above 6% likely off the table.

Traders at one point expected interest rates to rise as high as 6.5%.

“The market I think is a bit more reasonable now in its expectations for a BoE rate hike,” said Joseph Capurso, head of international and sustainable economics at the Commonwealth Bank of Australia.

The euro rose 0.18% to $1.1220, as investors looked to next week’s European Central Bank (ECB) policy meeting for further clarity on its rate outlook.

ECB policymakers in recent days have taken a more dovish tone, with governing council member Yannis Stournaras most recently hinting that a future rate hike last July would likely be a 25 basis points increase that remains elevated.

The US dollar index fell 0.15% to 100.10, but regained some lost ground after a more than 2% fall last week.

The Japanese yen rose nearly 0.3% to 139.33 per dollar.

Reporting by Rae Wee; Editing by Sam Holmes and Jamie Freed

Our Standards: The Thomson Reuters Trust Principles.

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