The Australian Dollar (AUD) continued its decline for a third consecutive day, trading around 0.6970 against the US Dollar during Asian hours on Wednesday, and hitting a six-month low versus the Japanese Yen following the release of key economic data from both Australia and China [1][2][3][4]. Australia's Consumer Price Index (CPI) accelerated to 4.0% year-over-year in August, up from 3.5% in July and matching market expectations, while the monthly inflation rate eased to 0.4% from 1.0% previously [1][2][4]. The Trimmed Mean CPI, a core inflation measure, held steady at 3.6% YoY, but its monthly reading cooled to 0.2%, slightly below the 0.3% forecast [1][2][4]. Despite the uptick in headline inflation, the data did little to revive expectations for another Reserve Bank of Australia (RBA) rate hike, especially as Governor Bullock signaled a mild-dovish tilt at the post-meeting press conference on Tuesday [2].
In China, both official and private-sector PMIs for September indicated a return to expansion. The National Bureau of Statistics (NBS) Manufacturing PMI rose to 50.1 from 49.8 in August, matching forecasts, while the Non-Manufacturing PMI climbed to 50.2 from 49.0, beating expectations [1][5][7]. The private RatingDog Manufacturing PMI surged to 52.1, surpassing both the previous 51.5 and the 51.6 consensus, and the Services PMI edged up to 51.6, also above expectations [1][3]. Despite these positive signals from China, the AUD remained under pressure, with the AUD/USD pair down 0.25% to 0.6970 and AUD/JPY falling sharply, reflecting the AUD's status as the weakest major currency against the Yen [2][3][4].
Market sentiment was further influenced by global monetary policy expectations. US rate hike bets continued to push bond yields higher, with strategists at BNY Markets noting that the market is pricing in up to 75 basis points of additional tightening, and Fed officials maintaining a hawkish stance [1]. Meanwhile, the Japanese Yen drew support from intervention concerns and expectations of further Bank of Japan (BoJ) rate hikes, as revealed in the BoJ's July meeting minutes and reinforced by warnings from Japanese officials and US President Donald Trump regarding currency depreciation [2].
In China, policymakers announced new targeted fiscal and monetary measures to lower financing costs and boost central bank lending, aiming to support growth amid ongoing economic challenges [7]. However, analysts at Nomura and Goldman Sachs expressed skepticism about the effectiveness of these measures, describing them as more significant for signaling policy intent than for delivering immediate growth, though a new mortgage subsidy could provide short-term support for housing demand [7].
Overall, the combination of rising Australian inflation, robust Chinese PMI data, and shifting global monetary policy expectations failed to lift the Australian Dollar, which remained under broad selling pressure, particularly against the Japanese Yen and US Dollar [1][2][3][4][5][7].
CONCLUSION
Despite stronger-than-expected Chinese PMI data and rising Australian inflation, the Australian Dollar extended its decline, hitting a six-month low against the Yen and weakening broadly against major currencies. Market participants remain unconvinced of further RBA tightening, while global monetary policy dynamics and cautious analyst outlooks on Chinese stimulus measures continue to weigh on the AUD. The market takeaway is a persistently bearish sentiment for the Australian Dollar in the near term.