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China holiday closures thin liquidity and raise FX headline risk

AUD is the most exposed major currency, with moves likely driven more by oil, Treasury yields, and the RBA while onshore China markets are shut.

Reported · Written up by our desk · Major Pairs

Mainland China markets are closed for the Mid-Autumn Festival on Friday, with another closure running October 1 to 7 for National Day, according to Forexlive. That sets up a week-long gap with thinner Asian liquidity as traders rely more on other market drivers.

Forexlive says AUD is the most exposed of the major currencies because it often trades as a proxy for China. With onshore activity shut, the currency is expected to lean more on oil, Treasury yields, and the RBA.

Forexlive also notes that Dalian iron ore futures are closed, shifting iron ore price discovery to the thinner Singapore contract. In addition, gold loses one of its biggest Asia-time demand sources as the Shanghai Gold Exchange shuts, with Chinese physical and speculative buying stepping aside.

The outlet warns that lighter volumes and wider spreads in Asia could cause moves on individual headlines to overshoot, and that traders may cut exposure ahead of the long China closures, contributing to price swings in the sessions leading up to National Day. After the holiday, early reopenings can also bring catch-up moves.

Latest closeGold $4,157.80 ▲0.4%

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