Forex news for Asia trading Tuesday 12 January 2016

China

  • Today's yuan strength - what the PBOC hope to achieve
  • PBOC's brutal offshore yuan short squeeze - more
  • China stock market lunch break - Shanghai Comp positive on session
  • Reuters: China's steel production and demand to continue to drop in 2016
  • Overnight yuan HIBOR to record 66.8% (from yesterday's 13.4%)
  • China stock market yo-yo. On session lows now.
  • China 2015 retail vehicle sales +8.5% y/y
  • China - Offshore yuan deposit rates soar, CNY-CNH gap narrows
  • China state planner: Expects China GDP growth at around 7% in 2015
  • China stockmarket opening indications - Shanghai Comp to open up 0.3%
  • PBOC sets USD/CNY mid-point today at 6.5628
  • "Expectations the yuan will depreciate sharply should be seen as ridiculous and humorous"
  • Reuters: Chinese banks' new non-performing loans more than doubled in 2015 from 2014
  • China press on the yuan, stocks

Comments from Federal Reserve's Kaplan:

  • More Fed Kaplan: By March there should be enough information to make a rate decision
  • More from Fed's Kaplan: Don't know that China's problems are worse than we thought
  • Fed's Kaplan: Confident US inflation will rise to 2% by end of 2017

Japan:

  • Japan PM Abe: Will create environment in which sales tax can be raised
  • Comments crossing re Japan's GPIF
  • Japan data - BoP Current Account Balance (November): ¥ 1143.5B (vs. expected ¥ 895.0B)
  • Japan finance minister Aso: Japan company fundamentals are not bad at all
  • Australia - Credit card balances $51.3bn AUD (prior $50.6bn) & purchases $25.6bn AUD ($54.28bn)
  • UK data - BRC Sales like-for-like December: +0.1% (vs. +0.5% expected)
  • New Zealand - ANZ Commodity Price Index for December: -1.8% m/m (prior -5.6%)
  • PIMCO on Australia - RBA more likely than not to provide additional policy support
  • PIMCO call further PBOC rate cuts - a further 50bp in cuts and 150 from RRR
  • ForexLive's Button: "Impressive that the Canadian dollar hasn't fallen further"
  • Australian data, ANZ / Roy Morgan Weekly Consumer Confidence: 114.1 (prior 116.3)

The People's Bank of China continued to act on its intention to calm the yuan market today, squeezing offshore yuan shorts. Meanwhile, Chinese stock markets showed some stability, and oil continued its decline.

We had comments from the new head of the Dallas Fed, Robert Kaplan, NZ commodity price data and Japanese current account data. See bullets, above, for those.

The focus was, once again, on China.

The PBOC kicked it off by holding the USD/CNY fix steady, for the third day in a row, confounding those looking for further yuan devaluation. Chinese stocks opened marginally stronger but soon lost ground and then recovered to be registering positive (for the Shanghai Composite) at the lunch break.

Attention switched to the activity in the offshore yuan market. Yesterday we saw overnight borrowing rates for offshore yuan move to a then record high of 13.4%. Today blew that record out of the water, with overnight to 66.8%, and huge gains in other maturities also. The 'gap' between CNY and CNH, which was at a record high last week today plummeted to parity (and below, the CNH trading stronger than the CNY today).

The PBOC are intent on calming the yuan market. While Chinese economic fundamentals point to likely continued yuan devaluation, and indeed the PBOC is likely to support this, the bank will do it a pace it deems appropriate and at present they've jumped on the brake.

Across the majors it was, in comparison, relatively sedate.

USD/JPY moved toward 118.00 in the Tokyo morning but has since given it all back to be around 50 points lower as I update. USD/CHF, too, was higher earlier and it too has given it all back (from just above 1.0020 to under 0.9995 now). EUR/USD followed a mirror pattern, down early and back to new session highs as I update (1.0840-ish to 1.0880-ish).

The locals, AUD and NZD, were more rangebound.. If the stabilisation of the yuan is 'risk' friendly the AUD and NZD buyers don't seem convinced just yet.

Oil lost more ground again today. Gold is net up a few dollars.

Regional equities with Shanghai closed for the lunch break:

  • Nikkei -2.59% (Japan was closed on Monday so the size of the fall in part reflects a catch-up, or down I suppose, to Monday
  • Shanghai +0.38%
  • HK +0.30%
  • ASX -0.36%

Still to come:

  • Preview of the central bank speaker bonanza Tuesday