Asia’s Forex news roundup: Yuan gains
On Wednesday, October 20, 2021, Forex news for Asia trading will be:
The overnight news of China’s state planner (the National Development and Reform Commission of the People’s Republic of China (NDRC)) threatening intervention in the coal market following a meeting with major domestic stakeholders dominated the session, with early limit moves lower for coal and coke.
As you can see above, I’ve reorganized the arrangement of the bullet-point links to headlines for the day to combine the China, and China-related, articles together.
Following a stretch of days of draining or neutral, the PBOC injected large cash via open market operations (OMO). The infusion is claimed to be tied to tax season payments and the sale of government bonds. The PBOC has consistently stated that it will use medium-term lending facilities to maintain domestic liquidity conditions.
The yuan hit a five and a half year high against its basket today.
Elsewhere across major Forex :
- USD/JPY hit a nearly four high above 114.60, yen crosses higher also of course
- EUR, AUD, NZD, GBP and CAD all rose for gains (not overly large) against the USD. ‘Reflation’ was the word again with global bond pricing higher prevalent. Indeed, the spread between the US 3 mth and 10 year hit its widest since June and the 10 yr yield moved to a 5 month high.
USD/JPY to its highest since November of 2017 today
People’s Bank of China set the onshore yuan (CNY) reference rate for the trading session ahead.
- USD/CNY is permitted to trade plus or minus 2% from this daily reference rate.
- CNH is the offshore yuan. USD/CNH has no restrictions on its trading range.
- Reuters estimate was 6.4090. A significantly stronger or weaker rate than expected is typically considered a signal from the PBOC.
- The previous close was 6.3821
- Yesterday’s mid-rate was 6.4307
The USD/ CNY mid-point today at 6.4069 is the strongest for the CNY since June 11.
PBOC injects 100bn yuan via 7-day reverse repos
- 10bn RRs mature today
- thus net 90bn injection in open market operations for the day
The PBOC has strung together many days of drain to neutral, a substantial injection instead today.