The US dollar is posting minor losses against most of the major currencies today. The Japanese yen is the exception, as the greenback continues to straddle JPY105.  

There have been several developments today, and the US also has a full economic calendar today. The most important of the developments was the upbeat message from the Reserve Bank of Australia. The Australia dollar is easily the strongest currency on the day, rising 0.7% against the greenback. It is poised for another run the $0.7700 area that has blocked the upside for the past several months. Australia’s AAA 10-year sovereign bond yield rose three bp to 2.80%. The two-year yield rose the same among to 1.675%.  

The RBA said as it kept the cash rate at a record low 1.5%, that current rates were sufficient to sustain the expansion. There was also the now regular concern over property prices. The RBA statement also acknowledged that currency appreciation could complicate the situation. The important takeaway is that the RBA appears to have shifted to a neutral bias and a rate. The market has reduced the odds of a rate cut next year to around one-in-three. Separately, Australia’s Oct manufacturing PMI rose to 50.9 from 49.8. The PMI is recovering from the sharp fall in August (to 46.9 from 56.4), and is back above the 50 boom/bust level for the first time since then.  

China’s PMI also surprised on the upside. The official manufacturing reading rose to 51.2 from 50.4. This is a two-year high, well above the 50.3 median forecast in the Bloomberg survey, and the third month above 50. The non-manufacturing PMI rose to a new high for the year. It stands at 54.0 from 53.7. Caixin’s manufacturing PMI rose to 51.2 from 50.1. This is also a two-year high. It gives further support to our contention that Chinese policymakers have the will and wherewithal ensure a soft economic landing.  

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