CNH: USD/CNH Testing Under 7.1200 Amid Continued Dollar Weakness, Q3 GDP Mon
USD/CNH is probing lower in early Friday dealings, last just under 7.1200. We are around fresh lows back to late Sep (7.1187). A clean break lower would likely bring the 7.1000 region back into focus. On the upside, a clean break back above the 50-day EMA (near 7.1425) is likely needed to reduce the bearish threat. The USD remains softer, albeit mostly against the safe havens like USD/JPY (just up from session lows near 150.00), as risk appetite is softer in US markets on credit concerns. Spot USD/CNY ended yesterday at 7.1246, while the CNY CFETS basket tracker fell 0.24% to 97.13, but is only marginally down on recent highs.
- Focus will remain on the USD/CNY fixing, which has broken under 7.1000 this week, with market focus on further downside as a sign of comfort around further yuan gains.
- US-China relations remain in focus. Via BBG: "Chinese Commerce Minister Wang Wentao says the recent fluctuations in China–US economic and trade relations are mainly because of a series of “restrictive measures” by the US after the Madrid trade talks, according to a ministry statement." Comments this week from either side don't hint at a major breakthrough.
- The China to global equity ratio has improved, but remains off recent highs. The CSI 300 has seen steadier trends, with the ratio more likely to be driven by US/offshore developments than locals ones in the near term.
- Next Monday delivers Q3 GDP, which is expected to have slowed (4.7%y/y is the forecast, against +5.2% for Q2). Sep activity figures are also out.
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AUSSIE BONDS: Dec-35 Supply Faces Lower Yield & Flatter Curve
The Australian Office of Financial Management (AOFM) will today sell A$1200mn of the 4.25% 21 December 2035 bond. The line was last sold on 13 August 2025 for A$1200mn. Bidding is likely to be shaped by several key factors:
- The current outright yield is around 5bps lower than at the time of the previous auction and approximately 50bps lower than the peak in late 2024.
- The 3/10 yield curve is around 5bps flatter than the previous auction level and sits around 25bps below its recent high.
- On the positive side, the auction comes amid stronger sentiment toward longer-dated global bonds.
- Moreover, the line is included in the XM basket.
- While some factors may limit the overall strength of bidding, there is an expectation of continued firm pricing at today's auction.
- Results are due at 0200 BST / 1100 AEST.
AUSSIE BONDS: AUCTION PREVIEW: ACGB Dec-35 Supply Due
The Australian Office of Financial Management (AOFM) will today sell A$1200mn of the 4.25% 21 December 2035 bond. The line was last sold on 13 August 2025 for A$1200mn. The line was opened via syndication on 24 July 2024 for A$11.5bn.
- The last sale drew an average yield of 4.2776%, at a high yield of 4.2800% and was covered 3.2417x. There were 33 bidders, 22 of which were successful and 13 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 18.2%.
- This week's ACGB supply is at the top of the recent average weekly issuance of $1500-2200mn, with A$1000mn of the 1.00% 21 December 2030 bond due on Friday.
- During the first half of 2025-26, the AOFM plans to: issue a new October 2036 Treasury Bond (by syndication and subject to market conditions); conduct 2 Treasury Bond tenders most weeks; hold 1-2 Treasury Indexed Bond tenders each month.
- Issuance of Treasury Bonds (including Green Treasury Bonds) in 2025-26 is expected to be around $150 billion. Issuance of Treasury Indexed Bonds in 2025-26 is expected to be between $2 billion and $3 billion.
- Results are due at 0200 BST / 1100 AEST.
JAPAN DATA: Exports Down Y/Y But Above Forecast, US Exports Down 13.8%y/y
Japan headline Aug trade figures were mixed. Exports were -0.1%y/y, against a -2.0% forecast (-2.6% was the July outcome). On the import side, we fell -5.2%y/y, against a -4.1% forecast and -7.4% prior outcome. The trade deficit was -¥242.5bn, against a -¥512.6bn forecast, while July's print was -¥118.4bn. In seasonally adjusted terms the trade deficit was -¥150.1bn, which was also better than forecast, but sub recent cycle highs for the balance (+¥166.5bn in Feb).
- Tariff impact was seen, with exports to the US down -13.8%y/y. To the EU exports rose 5.5%y/y, while to China exports were down a modest -0.5%y/y. The trade surplus Japan has with the US narrowed to ¥324bn. In Feb this year the surplus was at ¥918.5bn.
- Automobile exports fell 7.9% in August, the fifth consecutive decline following an 11.4% fall in July. Iron and steel exports dropped 14.9%, easing from July’s 21.0% fall. Auto exports to the US fell by 28.4%.
- Export growth for Japan was down in y/y terms for the fourth straight month. The chart below shows export growth for key Asian economies (Japan is the red line). Outside of Taiwan, which is the standout, the trends are broadly similar, albeit with China and South Korea managing to maintain positive y/y growth in recent months.
Fig 1: Key Asian Economy Export Growth Trends - Y/Y
Source: Bloomberg Finance L.P./MNI
