Article Highlights

  • Nikkei down by 1.7%
  • New Zealand credit card spending up by 4.7%
  • RBA official Ridout jawbones Australian dollar
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What a bloodbath for the Aussie! After suffering a selloff on the heels of weak Chinese PMI earlier this week, the Australian dollar underwent a fresh wave of selling today when RBA official Ridout pointed out that the currency is still overvalued and that .8000 is the ideal level for AUD/USD.

It didn’t help the Aussie’s cause that China recently released a report that caused market watchers to speculate about a potential credit crunch. As it turns out, Chinese bank ICBC is no longer accepting bailouts for investment trust products, making a default a possible scenario.

Over in New Zealand, credit card spending posted a 4.7% year-over-year increase, weaker compared to the previous 6.9% reading. Despite the uptick, the Kiwi was unable to hold on to its gains, as it caved to risk aversion and Aussie weakness.

Meanwhile, the Nikkei stock index closed 1.7% lower for the day as the risk-off market environment forced traders to flee to the lower-yielding safe-haven assets. Yen pairs slid lower, with AUD/JPY breaking below the 90.00 handle and GBP/JPY retreating to 171.50.

Up ahead, the U.K. has the BBA mortgage approvals up for release and it is expected to show an increase from 45.0K to 47.2K. Stronger than expected data could provide support for pound pairs and allow GBP/USD to extend its gains. Italian retail sales data is also up for release but this might not have such a pronounced impact on euro pairs.

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