06:28 AM EDT, 10/08/2024 (MT Newswires) -- The worst-performing G10 currency overnight Monday was the Australian dollar, reflecting investor disappointment following the briefing by the National Development and Reform Commission (NDRC) in China, said Mitsubishi UFG.

According to Bloomberg, officials from China's economic planning agency said they will speed up spending and largely reiterated plans to boost investment and increase direct support for low-income groups and new graduates, wrote the bank in a note to clients.

The key takeaways from the NDRC briefing were: i) plans to bring forward CNY100 billion in government investment originally budgeted for 2025, ii) plans to expand sectors allowed to use funds raised from special local bond sales, iii) plans to push provinces to issue about CNY290 billion in new special local bonds allocated for this year by the end of October, and iv) plans to accelerate the use of special local bond funds and construction of related projects. In addition, China will continue to issue ultra-long sovereign bonds next year to support major projects.

The measures support the NDRC's commitment to meeting this year's gross domestic product growth target of around 5%. However, the policy announcement fell short of market expectations for larger fiscal stimulus, stated MUFG.

Prior to the policy announcement, some banks had been speculating that the fiscal package could total around CNY2 trillion to CNY3 trillion. The NDRC emphasized that the government would make the best use of existing resources indicating that it isn't planning to increase its budget pointed out the bank.

According to Bloomberg, around CNY18.4 trillion of budgeted expenditure remained unspent at the end of August. Investors were also left disappointed by the lack of details for spending plans.

Overall, the NDRC's update overnight has put a dampener on building investor optimism over a pick-up in growth heading into early next year, added MUFG. It follows the package of easing measures announced last month including rate cuts and direct support for the housing and equity markets.

With monetary policy viewed as less effective at stimulating growth in China, market participants have been placing more weight on the need for bigger fiscal stimulus. As a consequence, it isn't surprising to see the renminbi, other Asian and commodity-related currencies weaken overnight as market participants' optimism over stronger growth in China has been dampened, noted MUFG.

At the same time, the Australian dollar has been undermined in part by the release overnight of the minutes from the Reserve Bank of Australia's last policy meeting on Sept. 24th, according to MUFG. The minutes have been viewed as another small step closer for the RBA to cut rates.

The minutes dropped the reference that "it was unlikely that the cash rate target would be reduced in the short-term." It has encouraged market speculation that the RBA could begin to cut rates before the end of this year. The Australian rate market is currently pricing in just over a 50% probability of a 25bps rate cut by the December policy meeting.

However, Deputy Governor Andrew Hauser stated in the press conference that the RBA was only trying to zoom in on potential risks that could affect policymaking. The minutes revealed that members affirmed that monetary policy would need to be sufficiently restrictive until they were confident that inflation was moving sustainably toward the target range.