China's Services Purchasing Managers' Index (PMI), released by RatingDog, rose to 51.4 in August from 50.4 in July, surpassing the market consensus of 50.6 according to both sources [1][2]. This improvement in Chinese services activity provided a boost to currencies closely tied to China's economic performance, such as the New Zealand Dollar (NZD), which rebounded above 0.5850 against the US Dollar (USD), snapping a four-day losing streak and trading near 0.5860 during the early Asian session on Thursday [2]. The positive Chinese data also included an uptick in the NBS Manufacturing PMI to 49.8 in August from 49.2 in July, exceeding the expected 49.7, while the NBS Non-Manufacturing PMI remained steady at 49.0 [2].
In contrast, the Australian Dollar (AUD) weakened against the Japanese Yen (JPY), with the AUD/JPY pair extending losses for the fourth consecutive day and trading around 113.50 during Asian hours on Thursday [1]. The AUD's decline was attributed to mixed economic data from both Australia and China. Australia's trade balance narrowed to A$1,923 million in July from a revised A$2,341 million surplus in the previous reading, though it still beat expectations of A$1,390 million. This contraction was driven by a 3.3% drop in exports and a 2.5% decline in imports [1].
Japanese economic activity showed resilience, with the Jibun Bank Services PMI rising to 52.5 in August from 51.2 in July, marking the strongest growth since March and indicating a rebound in new orders [1]. The Jibun Bank Composite PMI also increased to 53.5 in August, the highest since February, extending the private sector's expansion streak to 17 consecutive months [1]. Despite this, strategists at BNY Mellon expressed skepticism about the Japanese authorities' ability to achieve a materially stronger Yen, citing ongoing reflationary policies [1].
Meanwhile, market sentiment for the NZD/USD pair remains cautious. Despite the short-term rebound, technical analysis indicates a bearish tone, with the pair consolidating just above the lower Bollinger Band and the Relative Strength Index at 43.4, suggesting fading upside momentum [2]. Resistance is seen at 0.5910 and 0.5990, while support lies at 0.5845 and 0.5825 [2]. Additionally, hawkish comments from Federal Reserve Chair Kevin Warsh at the Jackson Hole meeting have increased market expectations for a US rate hike in September, with fed funds futures pricing in a 62.3% chance of a quarter-point hike, up from 40% before the speech [2].
CONCLUSION
Stronger-than-expected Chinese services PMI data has led to divergent moves in Asia-Pacific currencies, supporting the New Zealand Dollar while weighing on the Australian Dollar against the Yen. Despite positive signals from China and Japan, broader market sentiment remains cautious amid expectations of tighter US monetary policy.