Tuesday, 11 August 2015
Chinese yuan on the three-year minimum
The US dollar has strengthened against the major world currencies based on the decline of the Chinese national currency - yuan has dropped to the three-year minimum. Taking into account the severe control of the Chinese central bank over the national currency- this step means a shift in the national policy and raises questions on the stability of the world’s second largest economy.
Asian markets have reacted with a decrease while government bonds traditionally show growth in moments of uncertainty and market tension. Investors prefer to analyze the possible consequences of such an unexpected decision regarding relatively stable national bonds by the Chinese regulator. In any case, such a decision marks the end of the official period of strong yuan supported by the regulator.
The Chinese Central Bank described this decrease, by almost 2%, as a “one-time reduction” and published an explanation that the decision was taken based on the new policy of controlling the exchange rate that reflects a current market situation.
Investors reacted to an immediate sale of the Australian dollar, which is often used by investors and speculators as a more liquid substitute for the Chinese currency. Based on the news release "Aussie" fell from $ 0.7325 to $ 0.7430.
Other Asian currencies have also cheapened against the US dollar. For example, the Singapore dollar is at the five-year minimum. The US dollar has strengthened by 0.4% against the basket of currencies and rose to 97.52. Euro has dropped to 1.0971 and against the Japanese yen the dollar has strengthened to 125. During news release there was a volatile trading on Chinese share markets but eventually fell back below. On average, the drop of Chinese share markets was 0.2-0.3 after a slightly positive market closing on Monday.
The largest index of the Asian-Pacific region MSCI lost 0.7%; the Japanese Nikkei has cheapened by 0.6%.
Based on this, the demand for government bonds of tens of the US treasuries fell by 3 basis points to the value of 2.198%.
Futures of the US indices S&P 500 and Nasdaq are traded, on average, cheaper by 0.5%.
On commodity markets, the shift in the monetary policy of Beijing can be seen as negative in the very short run, since a cheap yuan means more expensive resources for Chinese companies. This way, copper futures fell by 1%.
Follow our reviews.
The review was prepared by the analytics department of Fort Financial Services.
Asian markets have reacted with a decrease while government bonds traditionally show growth in moments of uncertainty and market tension. Investors prefer to analyze the possible consequences of such an unexpected decision regarding relatively stable national bonds by the Chinese regulator. In any case, such a decision marks the end of the official period of strong yuan supported by the regulator.
The Chinese Central Bank described this decrease, by almost 2%, as a “one-time reduction” and published an explanation that the decision was taken based on the new policy of controlling the exchange rate that reflects a current market situation.
Investors reacted to an immediate sale of the Australian dollar, which is often used by investors and speculators as a more liquid substitute for the Chinese currency. Based on the news release "Aussie" fell from $ 0.7325 to $ 0.7430.
Other Asian currencies have also cheapened against the US dollar. For example, the Singapore dollar is at the five-year minimum. The US dollar has strengthened by 0.4% against the basket of currencies and rose to 97.52. Euro has dropped to 1.0971 and against the Japanese yen the dollar has strengthened to 125. During news release there was a volatile trading on Chinese share markets but eventually fell back below. On average, the drop of Chinese share markets was 0.2-0.3 after a slightly positive market closing on Monday.
The largest index of the Asian-Pacific region MSCI lost 0.7%; the Japanese Nikkei has cheapened by 0.6%.
Based on this, the demand for government bonds of tens of the US treasuries fell by 3 basis points to the value of 2.198%.
Futures of the US indices S&P 500 and Nasdaq are traded, on average, cheaper by 0.5%.
On commodity markets, the shift in the monetary policy of Beijing can be seen as negative in the very short run, since a cheap yuan means more expensive resources for Chinese companies. This way, copper futures fell by 1%.
Follow our reviews.
The review was prepared by the analytics department of Fort Financial Services.
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