Tag Archives: yuan

Worldwide MARKETS-Investor nerves tested with yuan, oil, Fed in play

LONDON Volatility swept via globe markets on Monday with China’s yuan hitting a fresh multi-year year low and oil’s continued travails adding to nervousness prior to an expected hike in U.S. interest prices later this week.

Asian stocks traded in the red but European stocks showed much more signs of life, recovering from their worst week in nearly 4 months to open this week on a optimistic note.

Emerging markets struggled for direction, weighed down by the weakness in China’s currency, Asian stocks and oil, but buffeted by a surge in South African markets right after Pravin Gordhan was re-appointed finance minister.

In early trading on Monday, the FTSE EuroFirst index of top 300 shares .FTEU3 was up .6 percent at 1,406 points. That followed final week’s three.eight percent fall, the second greatest weekly fall this year.

Britain’s FTSE one hundred .FTSE was up .6 percent and Germany’s DAX .GDAXI was up .4 %, in stark contrast to Asia, where MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS hit a two-1/two-month low and was final down .8 percent and Japan’s Nikkei .N225 fell 1.8 %.

The People’s Bank of China on Monday continued guiding its currency decrease, setting the yuan/dollar official midpoint at its weakest because July 2011.

Beijing’s introduction of a yuan price index against a basket of peers, noticed as a move traders stated would depeg the renminbi from the greenback more than time, additional weighed on the yuan.

Oil prices continued their freefall following the International Power Agency (IEA) warned that global oversupply could worsen next year. Brent crude LCOc1 fell below $ 38 a barrel for the initial time in seven years on Friday and was final down 1.6 percent at $ 37.30, within a few cents of Friday’s low.

The scattergun nature of worldwide markets comes as the U.S. Federal Reserve is probably to raise interest prices for the very first time in virtually a decade later this week.

“Nerves are fraying ahead of the Fed’s anticipated decision to lift U.S. rates on Wednesday. And this might just be a foretaste of what’s to come if the market place does not like what the Fed has to say on Wednesday,” stated Steve Barrow, head of G10 method at Normal Bank in London.

On Friday, the Dow .DJI sank 1.8 percent and the S&P 500 .SPX lost 1.9 percent. Each indices are in the red year-to-date, on track for their 1st annual decline since 2008.

RETALIATION IN 1st

Talk of so-called “currency wars” picked up again following China’s decision to loosen its grip on the yuan and allow slow but steady depreciation in recent weeks added to issues that the economy may be far more fragile than expected.

China late on Friday launched a new trade-weighted yuan exchange rate index. Beijing mentioned it was intended to discourage investors from exclusively tracking the yuan’s fluctuations against the greenback.

Information on Saturday painted a slightly brighter economic image, nevertheless. Factory output development accelerated to a 5-month high, while retail sales rose at an annual 11.two percent pace, the strongest this year.

Spot yuan CNY=CFXS fell to as low as six.4665 to the dollar, its lowest because mid-2011, taking its losses far this year to about 4 percent. Volatile Shanghai stocks .SSEC ended Monday two.five percent greater, the most significant rise considering that Nov. four.

“We seem to find ourselves edging towards the subsequent, most worrying phase of FX Wars … to a synchronized try by all major economies to maintain their currencies from appreciating, or to guide them decrease,” Rabobank analysts stated on Monday.

“Logically, that cannot be accomplished for all of them, and if China manages to succeed in its objectives, it will mean other individuals are failing to do so, potentially forcing other central banks to retaliate,” they said.

South Africa’s rand had been 1 of the greatest movers down in current months, in portion due to investor issues more than the country’s political turmoil, especially the instability surrounding the position of finance minister.

The rand rallied 5 percent on Monday, its largest rise in seven years, soon after the extensively-respected Gordhan was reappointed.

Elsewhere in currencies, the U.S. dollar rose against significant currencies, recovering some of final week’s lost ground. The euro was down a third of one particular percent at $ 1.0950 EUR= and the dollar was up a third of one % against the yen at 121.20 yen JPY=.

The greenback’s rise was supported by a move up in U.S. Treasury bond yields. The ten-year yield was up 3 basis points at 2.17 % US10YT=RR and the 2-year yield was up two basis points at .915 % US2YT=RR.

A U.S. price hike would be a very first step towards normalising monetary circumstances following an extended period of loose policy, which had helped shore up riskier assets.

(Reporting by Jamie McGeever Editing by Tom Heneghan To study Reuters Global Investing Blog click right here for the MacroScope Blog click on blogs.reuters.com/macroscope for Hedge Fund Weblog Hub click on blogs.reuters.com/hedgehub)

UPDATE 1-China launches new yuan index to sway markets away from yuan-dlr concentrate

BEIJING China has begun issuing a yuan exchange price against a basket of currencies in a move to discourage investors from exclusively tracking the yuan’s fluctuations against the U.S. dollar.

The yuan has been weakening against the dollar in recent months, mainly pressured by industry jitters about slowing development in China and an expected interest rate rise in the United States.

The China Foreign Exchange Trade Technique (CFETS) announced late on Friday that it had launched a new trade-weighted yuan exchange rate index, which was at 102.93 on November 30, a rise of two.93 % from the finish of 2014. In that very same period, the yuan has fallen three % against the dollar.

The move is intended to “facilitate the market to observe the modify of RMB powerful exchange price from distinct perspectives”, the CFETS, China’s interbank foreign exchange industry, said in a statement.

“It is more desirable to refer to both the bilateral RMB-USD exchange price and exchange rate primarily based on a basket of currencies,” stated a commentary on the site of the official foreign exchange market place, which was also published on the central bank’s website.

Chinese officials have urged investors to gauge the yuan’s adjustments against a basket of currencies, rather than just the dollar, in a bid to ease market issues about the yuan’s weakness. Signaling to markets that the yuan’s weakness wasn’t unusual, the officials have noted the dollar’s gains against significant currencies.

Some analysts think the move signaled the central bank’s intention to progressively shift towards a basket system for the yuan, but other individuals disagreed.

“It ought to not be regarded as a formal policy shift by the PBOC to a certain exchange rate targeting regime that, the Monetary Authority of Singapore makes use of, for instance,” analysts at HSBC mentioned in a note.

On Friday, the yuan fell to its weakest in four-1/two years and posted its longest weekly losing streak in a decade, following the People’s Bank of China set its every day guidance rate at its weakest level given that August 2011.

The extended decline has prompted traders to wonder how a lot Beijing is prepared to let the currency to fall.

(Reporting by Beijing bureau Editing by Hugh Lawson & Shri Navaratnam)

UPDATE 3-China will press ahead with reform regardless of yuan blessing -Zhu

(Adds comments from Chinese vice-minister)

WASHINGTON Dec 1 China will not stop economic sector reforms following an International Monetary Fund selection to add the yuan currency to the fund’s benchmark currency basket, a senior Chinese policymaker stated on Tuesday.

The IMF’s executive board on Monday admitted the yuan, also known as the renminbi, to the Specific Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen, a symbolic win for Beijing’s campaign for recognition as a worldwide financial power.

“The yuan joining SDR does not mean (the) finish of reform of the economic sector in China,” China’s Vice Finance Minister Zhu Guangyao said at the Peterson Institute for International Economics.

But he made it clear Beijing was in no rush to let the yuan to float freely, as China tried to modify from an investment-driven model of financial growth to a single linked far more closely to innovation.

“Now we are continuing with a managed floating technique and we hope this system can assist us to effectively total the transition,” he mentioned.

Zhu also said that he hoped the currency would 1 day fully reflect industry values.

IMF policymakers stressed at Monday’s SDR discussion the require for China to continue and deepen reforms, and to tackle any operational troubles which may inhibit IMF members from exchanging renminbi for other currencies, the IMF mentioned.

IMF employees pointed to gaps in between onshore and offshore exchange rates and warned future deviations could pose challenges for IMF members, who may acquire some disbursements in RMB once the decision requires impact.

The employees outlined growing use of the yuan, which had to meet the test of becoming extensively utilised to make international payments and traded broadly in foreign exchange markets.

A survey showed members of the IMF reported holding $ 70 billion in renminbi-denominated assets in 2014, or 1.1 percent of official foreign asset holdings.

Information suggested that day-to-day average RMB turnover was roughly $ 250 billion in six regional trading centers, behind the four other SDR currencies as nicely as the Australian dollar, Canadian dollar and Swiss franc, the report said.

Information by means of April showed turnover in London rose 80 % over two years, whilst turnover in Canada – house to one particular of only two RMB clearing and settlement centers in the Americas – was up more than 400 % at .2 billion.

Trading in New York was too thin to warrant a separate mention. Former New York City Mayor Michael Bloomberg is leading a push to establish a U.S. renminbi hub. (Reporting by Krista Hughes editing by G Crosse and Grant McCool)

WRAPUP 1-China offshore yuan jumps on suspected intervention as IMF’s currency choice looms

* Stock markets -1.7 pct in morning soon after Friday crash

* Yuan continues slide, offshore yuan spread widens

* Some traders suspect c.bank intervention offshore

By Michelle Chen and Samuel Shen

HONG KONG/SHANGHAI Nov 30 China’s yuan jumped in offshore trade on Monday on suspected intervention by Beijing just hours ahead of an IMF selection that is anticipated to grant the currency reserve status, while Chinese stocks extended a selloff in a nerve-wracking morning session.

The offshore yuan opened at 6.4515 per dollar, its lowest level in 3 months and priced at a deep discount to the onshore rate – a predicament the central bank has resisted in the recent past following an unexpected devaluation in August had prompted market speculation of more yuan weakness.

The People’s Bank of China set the midpoint price at six.3962 per dollar prior to marketplace open, and the onshore spot yuan stayed pegged to the midpoint at six.3961.

Numerous minutes following opening trade, nevertheless, the offshore price firmed sharply to about six.42 per dollar, leading some traders to suspect state-owned Chinese banks had been acquiring up yuan on orders from the central bank.

The sharp early moves come just as the International Monetary Fund (IMF) appears set to approve the inclusion of the yuan in its reserve currency basket when it meets on Monday in what is seen as symbolic coming of age for the world’s second-most significant economy.

The anticipated approval will location the yuan on a par with the U.S. dollar, Japanese yen, British pound and euro, even though corporates have shown escalating reluctance to hold yuan assets offered expectations of additional easing in China and imminent interest price hikes in the United States.

That has led the offshore market place – which is not bound by the central banks’ guidance rate – to regularly value in far more devaluation going forward, leaving the People’s Bank of China (PBOC) grappling to handle market place expectations in line with its want to hold the exchange rate stable.

“The spread in between offshore and onshore markets is still huge even right after the suspected intervention,” stated an onshore yuan trader at a foreign bank in Shanghai, adding that robust dollar appetite by corporates in the onshore marketplace was also pushing down the exchange rate.

Stock markets opened relatively flat but then resumed sliding, right after posting their worst drop given that the summer time crash on Friday afternoon.

The sell-off accelerated after the lunch break. The CSI300 index fell two.four percent to 3,471.83 points at five:22 GMT, whilst the Shanghai Composite Index lost 2.six percent to 3,345.47 points.

But Wang Yu, analyst at Pacific Securities in Beijing, mentioned the stock marketplace is unlikely to suffer a repeat of the summer season rout as the government is keen for stability in equities to pursue additional monetary reforms.

“I’m not quite pessimistic,” Wang stated.

“The market place may possibly go down additional this week, but I don’t expect to see the kind of rout we saw in the summer. The government needs a steady market in order to resume some standard functions of the market and push for additional financial reforms.”

China CSI300 stock index futures for December fell 1.3 %, to three,442.6, 35.61 points under the current value of the underlying index.

The Hang Seng index dropped .2 %, to 22,015.30 points, and the Hong Kong China Enterprises Index lost .8 %, to 9,775.90.

(Extra reporting by Lu Jianxin, Sam Shen and the Shanghai Newsroom Editing by Kim Coghill & Shri Navaratnam)