Risk Appetite Sours Amid Raging Covid-19, Soft Chinese Data, Fall Of Kabul

China's disappointing economic activity data put another nail in the coffin of risk appetite, after the seizure of the Afghan capital by Taliban and the deepening Covid-19 crisis in the Asia-Pacific region inspired risk aversion.

• This risk-off cocktail sent AUD tumbling to the bottom of the G10 pile amid the tightening of Covid-19 rules in Australia. Melbourne and ACT extended their lockdowns by two weeks each, while parts of NT were placed under snap restrictions.
• Other commodity-tied currencies retreated in tandem. A degree of political uncertainty surrounding the general election called by PM Trudeau for Sep 20 may have generated an additional headwind for the loonie, amid lack of clarity on the Premier's chance to win an outright majority in parliament.
• Participants flocked into safe haven assets for the benefit of the yen, which topped the G10 scoreboard. Worth noting that Japan's flash Q2 GDP numbers were better than expected, but Sankei reported that the country would extend and expand its state of emergency through mid-Sep.
• The yuan was surprisingly resilient, given underwhelming data released out of China and a soft PBOC fix, with the USD/CNY midpoint set at CNY6.4717, 22 pips above sell-side estimate. Spot USD/CNH bounced off session lows in reaction to the data, but struggled to register any material gains. The rate slipped earlier as the PBOC rolled over CNY600bn of MLF funds, letting CNY100bn mature.
• The global economic docket is fairly empty later today, U.S. Empire Manufacturing & Canadian manufacturing sales take focus from here.