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Foreign Exchange Market Update

September 30, 2016

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

USD/CNY----6.6685 (onshore)
United States (US) Personal income and disposable income rose modestly in August. Real consumer spending rose 4.2% from Q1 to Q2 -- this quarter (with only July and August available so far) looks to be growing at only 2.4% annualized, indicating consumers are still spending cautiously with declining expenditures on durable goods in August.  Consumer inflation rose modestly year-over-year, and while still muted, reached its highest level in two years. On another note, manufacturing activity in the Chicago region expanded modestly in September to 54.2%, rebounding after a sharp decline in August. Also on another note, Consumer sentiment was revised upward in late September and is modestly above August's final level of 89.8%. While better than August, the index has still deteriorated in the last 3 months.
Australia’s dollar traded at 76.62 U.S. cents at 11:15 AM PST and New Zealand dollar traded at 72.83 U.S. cents. Australia Housing Industry Association (HIA) reported that its monthly survey of large-volume builders said new home sales rose 6.1% in September after plummeting 9.7% in August. The monthly indicator is prone to wild fluctuations. On another note, building authorizations in New Zealand declined in August. Statistics New Zealand reported that the number of new residential buildings fell at a seasonally adjusted 1% in August, following a decline of 8.1% in July that was originally reported as a 10.5% drop. Building authorizations were issued for a total of 2,834 new dwellings. The majority of those consents were comprised of houses. Authorizations rose 14% over year-ago levels.
Euro traded at 1.1232 against USD at 11:16 am PST. Germany retail sales in August compared to July were down 0.4%, worse than the 0.2% decline forecast by economists. The volatile figures had grown 1.7% in July. On a year on year measure, sales were still comfortably up however rising by 3.7% last month compared to August 2015 – far exceeding the 1.8% analysts had estimated ahead of the release. On another note, France’s consumer price index inflation accelerated 0.4% year-on-year in September 2016 after rising 0.2% in August. Rise in service prices and just a mild decline in energy prices is expected to have driven the acceleration in the headline inflation print. Services inflation accelerated 1.3% year-on-year, whereas energy prices dropped 1.2%.
British Pound exchange rate is 1.2971 against USD at 11:16 am PST. British consumer morale rocketed back to pre-Brexit levels in September, confounding expectations that the vote to leave the EU would wreak more lasting damage on Briton's willingness to spend. The GfK index, based on an online poll of 2,000 people, rose to -1 in September from -7 in August - the biggest increase since June last year and restoring levels seen in the months before the June 23 referendum. Analysts polled by Reuters had expected a score of -5 for September.
Japanese Yen traded at 101.41 per USD at 11:16 am PST. Japan's unemployment rate has climbed for the first time in six months. The jobless rate moved up to 3.1% in August from three per cent in the previous month. The unemployment rate for men increased to 3.4% from 3.2% in July, while the rate for women was unchanged at 2.7%. On another note, the headline consumer price index fell 0.5% year-on-year in August, down from July’s 0.4% contraction, but it matched economists’ expectations. Core inflation, which strips which strips out fresh food and is what the BoJ is trying to push to its 2% target, shrank 0.5% last month.
Canadian dollar traded at 1.3113 per USD at 11:16 am PST. Canada’s gross domestic product rose 0.5% in July from the previous month, to 1.67 trillion Canadian dollars. Market expectations were for a 0.3% advance. Canada’s energy producers led the increase, with a 5% gain, as oil production returned to normal levels following maintenance work in April and the wildfires in Alberta in May, which forced companies to curtail or shut down operations. Excluding energy, the data agency said July gross domestic product advanced 0.1% from the previous month. July’s increase follows 0.6% growth in June, which could reinforce expectations that a rebound is under way in the Canadian economy after a 1.6% annualized decline in the second quarter.
Onshore Chinese yuan traded at 6.6685 per USD at 11:16 am PST and offshore Chinese yuan traded at 6.6726 per USD. Activity at China's small and mid-sized firms expanded this month. The Markit/Caixin manufacturing Purchasing Managers' Index (PMI) came in at 50.1 for in September, a touch above the 50 reading recorded in August but below July's 50.6 reading.
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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