- Argentina’s currency crisis is so dire that it’s allowing people to open bank accounts using the Chinese yuan Yahoo! Voices
- Argentina Allows Banks to Open Yuan Accounts — Economist Says It Could Boost Chinese Currency as Safe Haven Alternative to US Dollar – Economics Bitcoin News Bitcoin News
- Argentina’s expanded use of yuan will speed up Chinese currency’s internationalization, says expert Global Times
- Argentina uses yuan for the first time to settle part of its IMF debt EL PAÍS USA
- ‘Another small step’ as Argentina allows deposits in China’s ‘safe haven’ yuan South China Morning Post
Tag Archives: Yuan
China Makes Advances in Ditching the US Dollar for Settlements — Inks Deal With Brazil and Completes First Yuan LNG Purchase – Economics Bitcoin News – Bitcoin News
- China Makes Advances in Ditching the US Dollar for Settlements — Inks Deal With Brazil and Completes First Yuan LNG Purchase – Economics Bitcoin News Bitcoin News
- Brazil, China ditch U.S. dollar for trade in favor of their own currencies TVP World
- Brazil, China aim to deepen agriculture, finance and trade cooperation CGTN
- China, Brazil to trade in local currencies – Chinadaily.com.cn China Daily
- Brazil & China Sign Agreement To Drop US Dollar And Use RMB Yuan – Real In Bilateral Trade Silk Road Briefing
- View Full Coverage on Google News
Asia shares up on Fed rate wagers, China reopening lifts yuan
SYDNEY, Jan 9 (Reuters) – Asian shares rallied on Monday as hopes for less aggressive U.S. rate hikes and the opening of China’s borders bolstered the outlook for the global economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 2.0% to a five-month top, with South Korean shares (.KS11) gaining 2.2%.
Chinese blue chips (.CSI300) added 0.7%, while Hong Kong shares (.HSI) climbed 1.4%. China’s yuan also firmed to its highest since mid-August under 6.8000.
Japan’s Nikkei (.N225) was closed for a holiday but futures were trading at 26,215, compared with a cash close on Friday of 25,973.
S&P 500 futures added 0.2% and Nasdaq futures 0.3%. EUROSTOXX 50 futures gained 0.6%, while FTSE futures firmed 0.3%.
Earnings season kicks off this week with the major U.S. banks, with the Street fearing no year-on-year growth at all in overall earnings.
“Excluding Energy, S&P 500 EPS (earnings per share) is expected to fall 5%, driven by 134 bp of margin compression,” wrote analysts at Goldman Sachs. “Entering reporting season, earnings revision sentiment is negative relative to history.
“We expect further downward revisions to consensus 2023 EPS forecasts,” they added. “China reopening is one upside risk to 2023 EPS, but margin pressures, taxes, and recession present greater downside risks.”
A sign of the strain came from reports Goldman would start cutting thousands of jobs across the firm from Wednesday, as it prepares for a tough economic environment. read more
In Asia, Beijing has now opened borders that had been all but shut since the start of the COVID-19 pandemic, allowing a surge in traffic across the nation. read more
Bank of America analyst Winnie Wu expects China’s economy, the second-largest economy in the world, to benefit from a cyclical upturn in 2023 and anticipates market upside from both multiple expansion and 10% EPS growth.
FADING THE FED
Sentiment on Wall Street got a boost last week from a benign blend of solid U.S. payroll gains and slower wage growth, combined with a sharp fall in service-sector activity. The market scaled back bets on rate hikes for the Federal Reserve.
Fed fund futures now imply around a 25% chance of a half-point hike in February, down from around 50% a month ago.
That will make investors ultra sensitive to anything Fed Chair Jerome Powell might say at a central bank conference in Stockholm on Tuesday.
It also heightens the importance of U.S. consumer price index (CPI) data on Thursday, which is forecast to show annual inflation slowing to a 15-month low of 6.5% and the core rate dipping to 5.7%.
“We at NatWest have lower than consensus CPI forecasts, and if right that will likely solidify the market pricing of 25bps vs 50bps,” said NatWest Markets analyst John Briggs.
“In context, it should still be seen as a Fed that is still likely to hike a few more times and then hold rates high until inflation’s decline is guaranteed – to us that means a 5-5.25% funds rate.”
Friday’s mixed data had already seen U.S. 10-year yields drop a steep 15 basis points to 3.57%, while dragging the U.S. dollar down across the board.
Early Monday, the euro was holding firm at $1.0673 , having bounced from a low of $1.0482 on Friday. The dollar eased to 131.48 yen , away from last week’s top of 134.78, while its index was flat at 103.600 .
The Brazilian real had yet to trade after hundreds of supporters of far-right former President Jair Bolsonaro were arrested after invading the country’s Congress, presidential palace and Supreme Court. read more
The drop in the dollar and yields was a boon for gold, lifting it to an eight-month peak around $1,877 an ounce .
Oil prices were steadier, after sliding around 8% last week amid demand concerns.
Brent bounced 80 cents to $79.37 a barrel, while U.S. crude rose 78 cents to $74.55 per barrel.
Reporting by Wayne Cole; Editing by Bradley Perrett and Christopher Cushing
Our Standards: The Thomson Reuters Trust Principles.
Asia-Pacific shares, China, yuan, Bank of Japan, Hang Seng index
Hong Kong’s John Lee announces further easing of measures
Hong Kong will remove all mandatory PCR tests for inbound travelers, Chief Executive John Lee said in a press briefing announcing further easing of the city’s Covid restrictions.
Lee added the city will also cancel the vaccine pass scheme, adding that the government will adopt “more targeted measures” for elderly vaccination.
Hong Kong will also remove all social distancing measures, including a ban on group gatherings of more than 12 people, Lee said, adding the measures will take into effect Dec. 29.
– Jihye Lee, Lee Ying Shan
Hong Kong to scrap Covid tests for arrivals, SCMP reports
Hong Kong is slated to scrap its mandatory PCR tests for inbound travelers, South China Morning Post reported, citing people familiar with the matter.
The report added that Hong Kong will fully drop its vaccine pass scheme, which requires proof of three doses of Covid vaccination to enter certain premises – the city will also remove a mandatory five-day home isolation for close contacts.
Hong Kong Chief Executive John Lee is expected to announce the latest updates in a media briefing at 3:30 p.m. local time.
The measures will also include lifting a current ban on public gatherings of more than 12 people, while maintaining rules for wearing masks.
—Lee Ying Shan
Hong Kong reopening stocks rise on China’s reopening measures
Nio shares plunge after trimming fourth quarter delivery outlook
Hong Kong-listed shares of Chinese EV maker Nio dropped 9.11% in Asia trading hours after the company lowered its fourth quarter delivery outlook, citing supply chain disruptions from Covid outbreaks in major Chinese cities.
The company now expects to deliver between 38,500 to 39,500 vehicles, down from its initial projection of 43,000 to 48,000 vehicles, according to the updated delivery guidance.
Its New York-listed shares saw an 8% drop during U.S. trading hours.
— Rebecca Picciotto, Lee Ying Shan
South Korea expected to see a further drop in exports and imports
South Korea’s export growth in December is expected to mark the third month of annualized drop, according to economists polled by Reuters.
Average forecasts project exports to fall 10.1% in December on an annualized basis – a slight improvement after seeing a drop of 14% in November, when it saw the biggest contraction since May 2020.
Economists expect the country’s import growth in December to have dropped 0.6%, resulting in a trade deficit of about $6.7 billion.
South Korea is scheduled to release its trade data on January 1.
— Lee Ying Shan
Bank of Japan says yield curve tolerance adjustment doesn’t mean monetary policy change
The Bank of Japan reiterated that its latest decision to expand the yield curve control tolerance range does not mean a change in its direction of monetary policy, according to the Summary of Opinions from its December meeting.
“The expansion of the range of 10-year JFB yield fluctuations from the target level is not intended to change the direction of monetary easing,” it said.
“It is a policy measure to make the current monetary easing … more sustainable,” it added.
Japan’s central bank added that reviewing its inflation target of 2% is “not appropriate.”
“Revision of that value is not appropriate since it could make the target ambiguous and the monetary policy response inadequate,” it said.
– Jihye Lee
Tesla’s Asia suppliers fall after production halt reported at Shanghai plant
Shares of Tesla suppliers in Asia fell as production at the company’s Shanghai plant reportedly remained paused after seeing a wave of Covid infections among its Chinese workforce.
South Korea’s LG Chem fell 3.66% and Japan’s Panasonic lost 0.31% in early Asia trade. Shares of Contemporary Amperex Technology, also known as CATL, fell 3.39%.
– Jihye Lee
Oil prices supported by China reopening and Moscow’s decree to ban oil sales
Oil prices rose on the back of a potential demand boost fueled by China’s reopening, as well as Moscow’s announcement to ban oil sales to countries participating in the U.S.-led price cap on Russian crude.
Brent crude futures rose 0.2% to $84.50 a barrel, while the U.S. West Texas Intermediate futures gained 0.19% to $79.7 a barrel.
According to a decree by Russian President Vladimir Putin, which was published on the Kremlin portal, Moscow said the established ban “applies to all stages of sales up to and including the final buyer.”
– Lee Ying Shan
U.S. weighs new rules for travelers from China
The U.S. government is considering imposing new Covid rules for travelers from China, officials said.
“There are mounting concerns in the international community on the ongoing COVID-19 surges in China and the lack of transparent data, including viral genomic sequence data, being reported from the PRC,” officials said.
Separately, Japan announced on Tuesday it would require a negative Covid test for visitors from China starting Dec. 30.
Read the full story here.
– Jihye Lee
China’s factory activity expected to contract for third straight month
China’s official manufacturing Purchasing Managers’ Index for December is expected to come in at 48 on Saturday, below the 50-point mark that separates growth from contraction.
Analysts polled by Reuters predict the reading will remain unchanged from November’s reading released by the National Bureau of Statistics.
PMI readings are sequential and represent month-on-month changes in factory activity.
— Lee Ying Shan
Tesla extends suspension of production at Shanghai plant: Wall Street Journal
Tesla suspended production at a plant in Shanghai on Saturday after a Covid outbreak among its employees at the facility, the Wall Street Journal reported.
The decision comes as an extension of a planned eight-day production pause, according to the report. The electric vehicle maker had informed employees that production will resume on January 2, it said.
Tesla stocks plunged 11% at the close and continued to slide further in after-hours trading.
—Lee Ying Shan, Alex Harring
Platinum on pace for best quarter since 2009
Platinum is on track for its best quarter since 2009 — and stocks associated with the metal are also posting strong performances.
The metal is trading up nearly 19.86% compared with the start of the quarter. That’s the best performance platinum has seen since the first quarter of 2009, when it gained 19.89%.
If platinum surpasses that quarter, it will be the best quarter since the first in 2008. In that period, it gained 33.96%.
Stocks associated with platinum are rising in turn. During this quarter, Impala Platinum added 31.7%. Anglo American Platinum and Sibanye Stillwater followed, gaining 21% and 17.6%, respectively, in the same period.
The Platinum Investment Council attributed some of the price increase to physical stocks of the metal being imported into China, which has decreased supply elsewhere.
— Alex Harring, Gina Francolla
Oil hits three-week high as investors cheer China’s quarantine changes
Oil prices reached a three-week high as investors hedged hopes of demand recovering on the latest news of China’s Covid restrictions easing.
Brent crude gained $1.55, or 1.9%, to $85.47 a barrel. U.S. West Texas Intermediate crude added $1.37, or 1.7%, to $80.93.
Both hit highs not seen since Dec. 5 earlier in the trading day. China’s National Health Commission said Monday it would stop requiring travelers coming into the country to quarantine, a move viewed by investors as a key step in rolling back the Covid restrictions that have hampered global supply chains and travel.
China-linked stocks rise as country eases restrictions
Shares of China-based companies trading on U.S. exchanges rose in the premarket as the country eases Covid restrictions. China announced it plans to lift quarantine requirements for travelers beginning Jan. 8.
Shares of Alibaba gained 1.5%, while JD.com and Pinduoduo rose more than 2% each.
China ETFs also gained, with the KraneShares CSI China Internet ETF up 2.7% in the premarket, on pace for its first gain in three sessions. iShares China Large-Cap and iShares China Large-Cap added 2% each.
The news also lifted Macau-linked casino stocks in the premarket. Las Vegas Sands was last up 1.4%, while Wynn and Melco Resorts rose 2.5% and 4.2%, respectively.
— Samantha Subin
International and emerging market stocks seen returning most over next 7 years, GMO says
International stocks, but especially emerging market stocks — and most notably emerging market value stocks — offer the greatest likelihood of outperforming large and small stocks in the U.S. over the next seven years, even after adjusting for inflation, according to the latest monthly projection from Grantham Mayo Van Otterloo & Co.
Emerging market value stocks are likely to return a real 9% per annum over the next seven years, while emerging market stocks as a whole are forecast to return 5.2% a year. International small-cap stocks are projected to return a real 4.5% while international large-cap stocks come in at 2.4% a year, after inflation.
The U.S. isn’t forecast to keep up, with U.S. small caps projected to shrink 1.4% each year after inflation, and U.S. large caps estimated to fall an average 1.8% annually over seven years.
Similarly, emerging market debt is likely to end up as the best-performing fixed-income class, returning a real 3.5% annually, followed by U.S. cash at +0.8%, U.S. inflation-linked bonds at 0.3%. International bonds hedged against currency exposure are forecast to lose 1.8% a year and U.S. bonds to return -0.3%.
As stocks floundered in 2022, valuations improved and the outlook for future returns has brightened. At the start of 2022, GMO pegged emerging market value stocks to return +5% annually over seven years, emerging market stocks +2.2%, international small caps -1.2%, international large caps -2.5%, U.S. small caps -6.5% and U.S. large caps -7.3%.
U.S. cash was projected to lose the least amount of money at the start of the year, falling 1.1% a year after inflation looking out over the next seven years, followed by emerging market debt at -1.7%, U.S. inflation-linked bonds (-3.7%), U.S. bonds (-4.1%) and currency-hedged international bonds (-4.7%).
— Scott Schnipper
Treasury yields climb
Bonds yields climbed Tuesday, putting pressure on growth stocks like technology.
The yield on the 10-year Treasury note was last up by 11 basis points at 3.854%. The 2-year Treasury yield rose 8 basis points to last trade at 4.402%.
Yields and prices have an inverted relationship. One basis point is equivalent to 0.01%.
The tech-heavy Nasdaq Composite, which is more susceptible to moves in rates, last traded 1.2% lower.
— Samantha Subin
China calls for oil to be traded with yuan at Gulf summit in Saudi Arabia
Former Secretary of State Pompeo senior advisor Mary Kissel reacts to Xi Jinping meeting with the Saudi crown prince, telling ‘Mornings with Maria’ this is a ‘significant strategic move by China.’
Chinese President Xi Jinping on Friday called on leaders from the top oil producing nations to conduct oil sales by using the Chinese yuan as he looks to bolster his country’s currency.
The move echoes steps Beijing took earlier this year with Russia and is an attempt to not only help push the yuan as a top international currency but aims to weaken the U.S. dollar – currently valued at $.14 per 1 Chinese yuan.
Xi addressed Gulf leaders in Saudi Arabia where Crown Prince Mohammed bin Salman hosted two events with Beijing to demonstrate Riyadh’s burgeoning relationship with China amid strained relations with the U.S. over human rights issues, energy and its relationship with Russia.
In this photo made available by Saudi Press Agency, SPA, Saudi Crown Prince and Prime Minister Mohammed bin Salman, right, greets Chinese President Xi Jinping, during the Gulf Cooperation Council (GCC) Summit, in Riyadh, Saudi Arabia, Friday, Dec. 9, (Saudi Press Agency via AP / AP Newsroom)
RUSSIA’S GAZPROM SIGNS GAS DEAL WITH CHINA TO CONVERT PAYMENTS TO RUBLE, YUAN
Reports first surfaced in March 2022 that suggested Saudi Arabia was advancing years-long negotiations with China that could see a shift in the oil trade off of the U.S. dollar.
The move would likely be a significant hit to the dollar and Western markets.
Prince Mohammed reportedly championed a “historic new phase of relations with China” at the start of the summit Friday with leaders from other the Gulf, Levant and Africa.
Saudi Arabia is already China’s top crude oil supplier with Russia coming in second, though Xi pledged to purchase more oil and gas from Gulf nations Friday.
“China will continue to import a large amount of crude oil from the GCC [Gulf Cooperation Council] countries, expand imports of liquefied natural gas, strengthen the engineering services in oil and gas upstream development and the cooperation in storage, transportation and refining,” Xi said.
In this photo released by Xinhua News Agency, Saudi Crown Prince and Prime Minister Mohammed bin Salman, center right, poses for photos with Chinese President Xi Jinping, center left, and other Arab Gulf leaders including Qatari Emir Sheikh Tamim bin (Xie Huanchi/Xinhua via AP / AP Newsroom)
CHINA’S XI JINPING MEETS WITH SAUDI RULERS IN ECONOMIC POWER PLAY: ‘NO LONGER A COMPETITOR’
The Chinese president also said that China would expand its ties with Saudi Arabia and other regional states without interfering in their domestic policies – a position Beijing has long criticized Washington over.
Xi’s proposition could prove appealing for nation leaders like the Crown Prince who has shared a rocky relationship with the U.S. for years, though particularly under the Biden administration.
The Chinese president also addressed the Israeli-Palestinian conflict and said China is committed to the establishment of an independent Palestinian state based on the UN’s 1967 boundaries of Israel.
In this photo released by Xinhua News Agency, Chinese President Xi Jinping meets with Palestinian President Mahmoud Abbas in Riyadh, Saudi Arabia, Thursday Dec. 8, 2022. Gulf Arab leaders and others in the Mideast are meeting in Saudi Arabia as part (Yao Dawei/Xinhua via AP / AP Newsroom)
CLICK HERE TO READ MORE ON FOX BUSINESS
“The Palestine issue is vital to the peace and stability in the Middle East,” Xi said. “The historical injustice suffered by the Palestinian people cannot continue indefinitely.
“The demand for an independent state cannot be vetoed,” he added, though notably without reference to human rights abuses against communities the Uyghurs on his own turf.
The Associated Press contributed to this report.
China’s Xi calls for oil trade in yuan at Gulf summit in Riyadh
RIYADH, Dec 9 (Reuters) – President Xi Jinping told Gulf Arab leaders on Friday that China would work to buy oil and gas in yuan, a move that would support Beijing’s goal to establish its currency internationally and weaken the U.S. dollar’s grip on world trade.
Xi was speaking in Saudi Arabia where Crown Prince Mohammed bin Salman hosted two “milestone” Arab summits with the Chinese leader which showcased the powerful prince’s regional heft as he courts partnerships beyond close historic ties with the West.
Top oil exporter Saudi Arabia and economic giant China both sent strong messages during Xi’s visit on “non-interference” at a time when Riyadh’s relationship with Washington has been tested over human rights, energy policy and Russia.
Any move by Saudi Arabia to ditch the dollar in its oil trade would be a seismic political move, which Riyadh had previously threatened in the face of possible U.S. legislation exposing OPEC members to antitrust lawsuits.
China’s growing influence in the Gulf has unnerved the United States. Deepening economic ties were touted during Xi’s visit, where he was greeted with pomp and ceremony and on Friday met with Gulf states and attended a wider summit with leaders of Arab League countries spanning the Gulf, Levant and Africa.
At the start of Friday’s talks, Prince Mohammed heralded a “historic new phase of relations with China”, a sharp contrast with the awkward U.S.-Saudi meetings five months ago when President Joe Biden attended a smaller Arab summit in Riyadh.
Asked about his country’s relations with Washington in light of the warmth shown to Xi, Foreign Minister Prince Faisal bin Farhan Al Saud said Saudi Arabia would continue to work with all its partners. “We don’t see this as a zero sum game,” he said.
“We do not believe in polarisation or in choosing between sides,” the prince told a news conference after the talks.
Though Saudi Arabia and China signed several strategic and economic partnership deals, analysts said relations would remain anchored mostly by energy interests, though Chinese firms have made forays into technology and infrastructure sectors.
“Energy concerns will remain front and centre of relations,” Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington, told Reuters.
[1/4] Saudi Crown Prince Mohammed Bin Salman stands with Chinese President Xi Jinping in Riyadh, Saudi Arabia December 8, 2022. Saudi Press Agency/Handout via REUTERS
“The Chinese and Saudi governments will also be looking to support their national champions and other private sector actors to move forward with trade and investment deals. There will be more cooperation on the tech side of things too, prompting familiar concerns from Washington.”
Saudi Arabia agreed a memorandum of understanding with Huawei this week on cloud computing and building high-tech complexes in Saudi cities. The Chinese tech giant has participated in building 5G networks in Gulf states despite U.S. concerns over a possible security risk in using its technology.
NATURAL PARTNERS
Saudi Arabia and its Gulf allies have defied U.S. pressure to limit dealings with China and break with fellow OPEC+ oil producer Russia over its invasion of Ukraine, as they try to navigate a polarised world order with an eye on national economic and security interests.
Riyadh is a top oil supplier to China and the two countries reaffirmed in a joint statement the importance of global market stability and energy collaboration, while striving to boost non-oil trade and enhance cooperation in peaceful nuclear power
Xi said Beijing would continue to import large quantities of oil from Gulf Arab countries and expand imports of liquefied natural gas, adding that their countries were natural partners who would cooperate further in upstream oil and gas development.
China would also “make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlement of oil and gas trade,” he said.
Beijing has been lobbying for use of its yuan currency in trade instead of the U.S. dollar.
A Saudi source, speaking before Xi’s visit, told Reuters that a decision to sell small amounts of oil in yuan to China could make sense in order to pay Chinese imports directly, but “it is not yet the right time”.
Most of Saudi Arabia’s assets and reserves are in dollars including more than $120 billion of U.S. Treasuries that Riyadh holds, and the Saudi riyal, like other Gulf currencies, is pegged to the dollar.
Earlier, the Chinese leader said his visit heralded a new era in relations, voicing hope the Arab summits would become “milestone events in the history of China-Arab relations”.
Additional reporting by Eduardo Baptista in Beijing, Riham Alkousaa, Ahmad Ghaddar and Lina Najm in Dubai
Writing by Ghaida Ghantous and Dominic Evans
Editing by Mark Heinrich, William Maclean and Mark Potter
Our Standards: The Thomson Reuters Trust Principles.
Exclusive: China’s state banks seen acquiring dollars in swaps market to stabilise yuan
SHANGHAI/BEIJING, Oct 17 (Reuters) – China’s state banks stepped up their intervention to defend a weakening yuan on Monday, with banking sources telling Reuters these banks sold a high volume of U.S. dollars and used a combination of swaps and spot trades.
Six banking sources told Reuters the country’s major state-owned banks were spotted swapping yuan for U.S. dollars in the forwards market and selling those dollars in the spot market, a playbook move used by China in 2018 and 2019 as well.
The selling seemed to be aimed at stabilising the yuan , with the swaps helping procure dollars as well as anchoring the price of yuan in forwards, said the sources, who have direct knowledge of market trades.
Register now for FREE unlimited access to Reuters.com
The yuan is down 11.6% versus the dollar this year. It was trading around 7.1980 per dollar on Monday.
One-year dollar/yuan forwards fell rapidly following the state bank actions, pushing the yuan to 6.95 per dollar. One of the sources noted the size of the dollar selling operation was “rather huge”.
“The big banks want to acquire dollar positions from the swap market to stabilise the spot market,” said another source.
State banks usually trade on behalf of the central bank in China’s FX market, but they can also trade for their own purposes or execute orders for their corporate clients.
A third source noted that the state banks’ trades appeared to be managed so that the country’s closely-watched $3 trillion foreign exchange reserves will not be tapped for intervention.
At the same time, the move helps state banks to procure dollars at a time when rising U.S. yields have made dollars scarce and expensive.
China burned through $1 trillion of reserves supporting the yuan during the economic downturn in 2015, and the sharp reduction in the official reserves attracted much criticism.
Register now for FREE unlimited access to Reuters.com
Reporting by Shanghai and Beijing Newsroom; Editing by Vidya Ranganathan and Ana Nicolaci da Costa
Our Standards: The Thomson Reuters Trust Principles.
China’s central bank PBOC warns against yuan speculation
The Chinese yuan weakened past the closely-watched 7.2 level against the greenback this week.
Getty Images
BEIJING — The People’s Bank of China has warned against betting on the yuan, after its rapid decline against the U.S. dollar this week.
“Do not bet on a one-sided appreciation or deprecation of the renminbi exchange rate,” the central bank said in a Chinese statement on its website late Wednesday, according to a CNBC translation.
That’s based on a readout of a speech by vice governor Liu Guoqiang at a video conference meeting on foreign exchange that day.
The renminbi, or the yuan, crossed the 7.2 level against the greenback Wednesday, falling to its weakest since 2008. The U.S. dollar index, which tracks the dollar against major global currencies, has climbed to two-decade highs as the U.S. Federal Reserve aggressively raised interest rates this year.
The PBOC’s statement, with its requirement for banks to maintain stability in the foreign exchange market, is “verbal guidance against the recent rapid depreciation of the currency,” Goldman Sachs analyst Maggie Wei and a team said in a note.
However, the yuan’s crossing of the 7.2 mark “suggests Chinese policymakers are not necessarily defending a particular level of the exchange rate,” the report said. The “statement from the PBOC might slow the pace of CNY depreciation on the margin.”
The onshore-traded yuan has weakened against the dollar by 1.9% so far this week, according to Wind Information.
The Chinese central bank has made other moves to support the yuan this month, including reducing the amount of foreign currency banks need to hold.
Stocks fall, Chinese yuan crosses 7.2 against the dollar
CNBC Pro: Credit Suisse says now’s the time to buy two green hydrogen stocks — and gives one over 200% upside
Credit Suisse says it’s time to enter the green hydrogen sector, with a number of catalysts set to drive the clean energy powerhouse.
“Green hydrogen is a growth market — we increase our 2030 market estimates by [over] 4x,” the bank said, forecasting that green hydrogen production will expand by around 40 times by 2030.
It names two stocks to play the boom — giving one upside of more than 200%.
CNBC Pro subscribers can read more here.
— Weizhen Tan
Chinese yuan at weakest since 2008, dollar index strengthens
The offshore and onshore Chinese yuan breached 7.2 against the dollar, hovering at weakest levels since early 2008.
The U.S. dollar index also strengthened by 0.33%, trading at 114.47.
Consumer inflation in Japan could decline in 2023: BOJ meeting minutes
Consumer inflation excluding fresh food is likely to rise this year, but the rate of increase will slow thereafter on energy prices, minutes from Bank of Japan’s July meeting said.
A few members also said inflation, excluding fresh food and energy, is unlikely to reach 2% within its projection period. That CPI reading was 1.6% in August.
“These members expressed the view that, unless commodity prices continued to rise, the CPI inflation rate was expected to decline from fiscal 2023 onward,” the minutes said.
On the yen, one BOJ board member said downward pressure on the currency could be alleviated if a slowdown in the global economy led to a decline in inflation and interest rates worldwide.
Another member said the yen could even appreciate if the global economy faces shocks.
— Abigail Ng
CNBC Pro: Asset manager reveals what’s next for stocks — and shares how he’s trading the market
Neil Veitch, investment director at Edinburgh-based SVM Asset Management, says he expects the macro landscape to remain “quite difficult” for the remainder of the year.
Speaking to CNBC Pro Talks last week, Veitch named the key drivers that could help the stock market to turn “more constructive” and shared his take on growth versus value.
CNBC Subscribers can read more here.
— Zavier Ong
Earnings questions, potential recession mean more selling could be ahead
The Dow and S&P 500 have fallen for six straight days, with many of those seeing broad selling typical of so-called “washout” days.
That can sometimes be a contrarian buy signal on Wall Street, but many investment professionals are skeptical that the selling is over. One reason is that earnings expectations for next year still show solid growth, which would be unlikely in the event of a recession.
“We know that if we start seeing a turnaround in the 2-year yields … and if we start seeing a turnaround in the dollar, that gives us the ability to bounce from these extremely oversold conditions,” said Andrew Smith, chief investment strategist of Delos Capital Advisors in Dallas. “But I have a hard time reconciling in my mind that the earnings story is going to be as good as we expect.”
Additionally, the dramatic moves in the bond and currency markets means that “something broke” and it may be smart to wait for that information to shake out, Smith said.
On the positive side, Smith pointed to a strong labor market and signs of continued spending on travel as a sign that the U.S. economy may be able to avoid a major recession.
— Jesse Pound
U.S. 10-year yield closes in on key 4% level
The 10-year Treasury yield is edging close to 4%, a level it has not touched since 2010.
The U.S. 10-year is the benchmark yield that sets the course for home mortgage rates and other consumer and business loans. It has bounded higher this week, as U.K. gilt yields race higher and on expectations of an aggressive Federal Reserve.
The yield was at 3.96% in afternoon trading. The 10-year yield reversed an earlier decline and gained about basis points. (A basis point equals 0.01 of a percentage point)
“It’s definitely been impressive, and I just think no one is yet willing to step in and catch the falling knife,” said Ben Jeffery of BMO. He added a lack of liquidity has also been pushing up yields, which move opposite price.
Jeffery said the yield was also moving higher ahead of the 1 p.m. auction of 5-year notes.
He said the 10-year tested the 4% level in 2010. “The last time we were sustainably above 4% was 2008. There’s another technical level at 4.10% and then there’s not much of note until 4.25%,” he said.
— Patti Domm
Why China’s central bank is shoring up the yuan
The Chinese yuan has tumbled to two-year lows against the U.S. dollar in the last few weeks.
Sopa Images | Lightrocket | Getty Images
BEIJING — China’s central bank has sent a strong signal it wants to keep the Chinese yuan from weakening too quickly against the U.S. dollar, economists said.
For a second time this year, the People’s Bank of China announced Monday it would reduce the amount of foreign currency banks need to hold.
Such moves theoretically reduce the weakening pressure on the yuan, which has tumbled by more than 8% this year to two-year lows against the U.S. dollar.
Chinese authorities typically emphasize the yuan’s level versus a basket of currencies, against which the yuan has strengthened by about 1% over the last three months.
However, Beijing’s latest actions show how important the yuan-dollar exchange rate still is, Nomura’s chief China economist Ting Lu and a team said in a report Monday.
They gave two reasons:
- “First, in a year of the once-in-a-decade leadership reshuffle and with elevated US-China tensions, Chinese leaders especially care about RMB’s bilateral exchange rate with USD because they believe RMB/USD somehow reflects relative economic and political strength.
- “Second, a big depreciation of RMB/USD could dent domestic sentiment and speed up capital flight.”
China’s ruling Communist Party is set in October to select a new group of leaders, while solidifying President Xi Jinping’s power.
Tensions between the U.S. and China have escalated in the last several years, resulting in tariffs and sanctions on Chinese tech companies.
Meanwhile, China’s economic growth has slowed in the last three years, especially with the shock of the pandemic in 2020. Tighter Covid controls this year, including a two-month lockdown of Shanghai, have prompted many economists to cut their GDP forecasts to near 3%.
That economic slowdown has contributed to the weakening yuan, which can help make Chinese exports cheaper to buyers in the U.S. and other countries.
The U.S. dollar has strengthened significantly this year as the U.S. Federal Reserve aggressively tightened monetary policy.
In addition, the greenback — as measured by the U.S. dollar index — has benefited from 20-year lows in the euro and a similar plunge in the Japanese yen.
Levels to watch
“We think the PBOC might have tolerance for further CNY depreciation against the USD, especially as the broad USD continues to strengthen, though they might want to avoid continued and too fast one-way depreciation if possible,” Goldman Sachs analyst Maggie Wei and a team said in a report Monday.
The analysts said they expect the yuan to depreciate to 7 against the dollar over the next three months. Nomura’s foreign exchange analysts forecast a 7.2 level by the end of the year.
The yuan last traded near 7.2 against the dollar around May 2020 and September 2019, according to Wind Information data.
“I don’t think it will go far beyond [7], certainly sort of beyond the 7.2 that we saw during the trade war,” Julian Evans-Pritchard, senior China economist at Capital Economics said Tuesday on CNBC’s “Squawk Box Asia.”
“I think that’s the key threshold,” he said. “I think the reason they’re reluctant to allow that to happen is, if it goes beyond that level, then expectations for the currency risk becoming unanchored. You risk seeing much larger-scale capital outflows.”
The PBOC on Tuesday set the yuan’s midpoint against the dollar at 6.9096, the weakest since Aug. 25, 2020, according to Wind Information. China’s central bank loosely controls the yuan by setting its daily trading midpoint based on recent price levels.
PBOC: Don’t bet on a specific point
The PBOC’s latest cut to the foreign currency reserve ratio — to 6% from 8% — is set to take effect Sept. 15, according to an announcement Monday on the central bank’s website.
Earlier on Monday, PBOC Deputy Governor Liu Guoqiang said that in the short term, the currency should fluctuate in two directions and people “should not bet on a specific point.”
That’s according to a CNBC translation of a Chinese transcript of Liu’s remarks at a press event on economic policy.
For the long run, Liu maintained Beijing’s hopes for greater international use of the yuan. “In the future the world’s recognition of the yuan will continue to increase,” he said.
— CNBC’s Abigail Ng contributed to this report.