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AUSSIE

AUD/USD went offered and shed ~30 pips on Monday, as the PBoC took action to curb the yuan's strength, while the press circulated articles highlighting fresh tensions in Australia's relations with China. A statement from China's central bank re: cutting the cost of shorting CNY spilled over into the Aussie, before the aforementioned reports gained some broader airing. Liquidity was somewhat thinned by the Columbus Day holiday in the U.S.

  • Last Friday, Argus Media and S&P Global Platt's cited unnamed sources pointing to a verbal instruction given to Chinese state-owned steel mills and utilities to "stop importing Australian thermal and coking coal with immediate effect". BBG ran another source report on the matter on Monday, noting that "ports have also been told not to offload Australian coal".
  • Speaking to Sky News this morning, Australian Trade Min Birmingham said that Canberra has reached out to Chinese off'ls via diplomatic channels, asking for clarification on the reports he called "speculation". Elsewhere, Birmingham told ABC that the gov't has contacted domestic industry with regards to the alleged Chinese ban on Australian coal, echoing his earlier comments from a statement.
  • Separately, Chinese Foreign Min Spokesman Zhao confirmed on Monday that China has formally indicted a detained Australian writer accused of espionage. Over the weekend, Australian Foreign Ministry said that he will be prosecuted for "charges yet to be announced".
  • The news came amid continued souring of Sino-Australian relations, with Chinese state media repeatedly warning that Australia's shift to an even more pro-U.S. military and political orientation could weigh on its economic ties with Beijing.
  • Separately, the gov't is set to launch a campaign promoting domestic tourism and Trade Min Birmingham said that he hopes the programme will help bring some relief to the industry, which employs 1 in 13 Australians.
  • AUD/USD trades flat at $0.7207 as we type, with bears hoping to see a break under the 100-DMA at $0.7084. This would turn focus to Oct 7 low of $0.7096. Conversely, a jump above Oct 9 high of $0.7243 would expose the 61.8% retracement of the Sep 1 - 25 sell-off at $0.7258.
  • Looking ahead, Australian Westpac Consumer Confidence comes out tomorrow, while a speech from RBA Gov Lower, consumer inflation expectation & labour market report are due Thursday.

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