AUD/JPY extends pullback from 1 1/2-week high on China concerns

AUD/JPY retreated for a second straight trading day on Monday, pulling back from a 1 1/2-week high, as concerns over China’s economic recovery heightened.

Last week, China, Australia’s largest export market, reported disappointing trade and CPI inflation figures, mounting pressure on the risk-sensitive Australian currency.

The Aussie dollar was also undermined by more woes in China’s property market – an industry that relies heavily on Australian iron ore.

The shares of Country Garden, China’s largest private property developer, plummeted to an all-time low on Monday, while its bonds faced sell-off.

Additionally, China’s credit data released on Friday indicated exceptionally weak domestic demand even after rate cuts.

On this week’s macro data front, Australia’s wage growth for Q2 and employment figures for July along with Japan’s preliminary GDP estimate for Q2 will be closely watched.

Australia’s seasonally adjusted wage price index probably increased 3.7% year-on-year in the second quarter, according to market consensus, following similar growth in Q1. It has been the sharpest annual rate of increase since the third quarter of 2012 and it reflected low unemployment, tight labor market and high inflation. The official data will be released tomorrow.

At the same time, Australia’s economy probably added 15,000 jobs in July, according to a consensus of estimates, following two successive months of upside surprises. The employment numbers are due out on Thursday.

And, Japan’s GDP probably expanded at an annualized rate of 3.1% in the second quarter, following a 2.7% growth in Q1. The preliminary figures are due out at 23:50 GMT on Monday.

As of 7:45 GMT on Monday AUD/JPY was edging down 0.25% to trade at 93.871. Last week, the minor Forex pair went up as high as 94.937. The latter has been the pair’s strongest level since August 1st (95.815).

In a volatile start of the week, the Japanese Yen weakened beyond the 145.000 threshold against the US Dollar, hitting lows unseen since November 10th in early Asian trade, after which it swiftly recouped part of the losses.

The USD/JPY pair was last trading at 144.825, with market players being on the lookout for clues over possible Bank of Japan intervention.