Asia’s commodity currencies crept higher on during Monday’s session as China continues to rebound from the COVID-19 pandemic, staying on course from gains in the last quarter. even as caution about the U.S. election outcome kept the U.S. dollar supported against other majors.
China’s gross domestic product was up by 4.9% in September from the same period last year. This is slower than previously forecast but faster than the third quarter, which has been boosted by strong gains in industrial output and an acceleration in retail sales.
The CNY and risk-sensitive AUD and NZD dipped from session highs after the GDP headline miss, but stayed bought on views the consumption data was a precursor of better growth in the current quarter. The CNY was last steady in onshore trade at 6.6982 per dollar, after hitting a fresh 18-month peak of 6.6852 in morning trade. The AUD and NZD both edged 0.1% higher, trimming earlier gains as last week’s dovish central bank remarks remain a weight on the currencies.
“The (Chinese) GDP numbers came in slightly below expectations, but the monthly data shows there is no reason to be overly pessimistic,” said Yoshiko Shimamine, chief economist at Dai-ichi Life Research Institute in Tokyo. “China’s economy remains on the recovery path, driven by a rebound in exports. Consumer spending is also headed in the right direction, but we cannot say it has completely shaken off the drag caused by the coronavirus.”
Industrial output in September expanded 6.9% from a year earlier, while retail sales grew 3.3%, both well ahead of expectations.
The USD was broadly stable elsewhere, with investor worries about rising coronavirus cases, the looming U.S. election and fading prospects of any fiscal stimulus beforehand providing support. The DXY followed with a 0.7% rise last week. The EUR held just above a two-week low at $1.1713.
The JPY was steady at 105.40 per dollar while the GBP also held its ground as investors clung to hopes for a Brexit breakthrough.
“The dollar can remain elevated this week,” said Commonwealth Bank of Australia analyst Kim Mundy. “A lack of fiscal stimulus and rising coronavirus infections raise concerns about the global economic outlook.”
Fading hopes that Democrats and the White House could agree on a new spending programme was tempered by the opposition of Senate Republicans and as investors focused on what the election outcome means for stimulus later.
A victory by Democrat Joe Biden was seen weakening the dollar due to perception of bigger spending. Fifteen days out from election day, Biden leads Trump by about 10 points in national polls, and has a narrow lead in several battleground states. The pair are due to face off in a final debate on Thursday.
“Markets will be attentive to any potential shift in polls, although traditionally the last debate has less impact in public opinion,” Barclays analysts said in a note. “The main risk for markets now would be a tightening in polls, which would reduce the likelihood of a large Democratic fiscal stimulus package and could raise the likelihood of a long contested election.”
