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Foreign Exchange Market Update

September 23, 2016

Indicative Interbank spot sell rates only as of 9:00 AM PST.

USD/CNY----6.6690 (onshore)
United States (US) September US manufacturing production slowed from August, but remained in growth territory. The Markit Manufacturing PMI Index fell to 51.4 from 52 the month prior. This reading was worse than the analyst consensus estimate of 51.9. Manufacturers are experiencing the slowest rise in new business intakes thus far this year, according to Markit. A weaker rate of output and softer business growth were cited as the largest contributing factors to a slower PMI reading. The latest growth in manufacturing production was the weakest for three months. Participants in the survey indicated that the overall soft economy “acted as a brake” on new order volumes. A stronger dollar was said to weigh on export sales as well.
Euro traded at 1.1236 against USD at 11:01 am PST. Speaking yesterday in Frankfurt, European Central Bank (ECB) chief Mario Draghi signaled that the ECB would continue with austerity and massive handouts to the banks. Despite the deepening slump in Europe and internationally, he proposed no change in the financial aristocracy’s irrational, economically destructive policies. On another note, the final reading of French economic output has shown the economy actually contracted in the second quarter. French GDP fell 0.1% quarter-on-quarter between April and June, in contrast to earlier readings suggesting it had been flat. It had grown 0.7% growth in the first quarter. A drop in household consumption was responsible for the second quarter dip.
Japanese Yen traded at 101.01 per USD at 11:01 am PST. Japan’s manufacturing industry expanded in September for the first time in seven months, raising cautious optimism that the worst of the factory slowdown had ended. The Markit/Nikkei flash manufacturing purchasing managers’ index (PMI) came in at 50.3 in September, up from a final reading of 49.5 in August. A median estimate of economists forecast conditions to worsen slightly.
Canadian dollar traded at 1.3178 per USD at 11:02 am PST. Canadian retail sales edged lower in July, falling short of expectations as sales at gas stations dropped for the first time in four months. The value of retail sales fell 0.1% in July to a seasonally adjusted 44.14 billion Canadian dollars. Market expectations were for a 0.1% increase. On another note, August consumer price inflation (CPI) dropped 0.2% from the previous month, compared to estimates for a 0.1% gain and July’s 0.2% decline. Year-on-year, CPI advanced 1.1%, less than the 1.4% forecast and compared to July’s reading of 1.3%. Core inflation, which excludes food and energy, was unchanged from the previous month, below the consensus forecast for a 0.2% rise and compared to July’s flat reading.
Onshore Chinese yuan traded at 6.6690 per USD at 11:02 am PST and offshore Chinese yuan traded at 6.6786 per USD. After a short-lived spike in activity after the Federal Reserve statement, the Shenzhen index reverted to quiet trading conditions on Friday with a gradual retreat on expectations of reduced leverage. The MNI China business sentiment indicator strengthened to 55.8 for September from 54.1 previously and this was the highest reading since August 2015. There was an increase in the orders index and confidence in manufacturing companies strengthened, although output declined slightly. The overall improvement should boost confidence in the short-term growth outlook.
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.




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