Talking Points:

• Aussie fell as PBOC weakened the Yuan reference rate by the most in one week
• AUD/USD continued fall after China’s New Yuan Loans print missed expectations
• Weak lending data may imply deeper Chinese slowdown than previously expected

The Australian Dollar resumed its decline against its US counterpart in a risk-off environment as China’s New Yuan Loans crossed the wires. The figure for December showed a print of 597.8b CNY, which was lower than the anticipated figure of 700.0b and November’s reading of 708.9b.

Two hours prior to the data release, the People’s Bank of China weakened the Yuan reference rate by 0.03 percent, the largest devaluation in over one week. The central bank’s actions, which likely triggered risk aversion, saw the Aussie and the Nikkei 225 track lower. Moments later, China’s Shanghai Composite was set to open down 0.7 percent. The risk-off session continued with the soft New Yuan Loans print.

Investors may have interpreted weaker-than-expected lending figures as indicative of a greater than anticipated slowdown in Chinese economic activity. Signs of a deepening slump in the world’s second largest economy bode ill for global growth at large. As such, the release amplified risk aversion across the risky asset spectrum, compounding pressure on Asian shares and sentiment-linked currencies (notably, the Aussie).