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19 Feb 2014
Flash: Yen appreciating in a risk-off environment - RBS
FXStreet (Guatemala) - Strategists at The Royal Bank of Scotland said there are nerves over Chinese financial conditions ahead of flash PMI Thursday.
Key quotes:
“With the recent weather effects in the US, apparent in a sharp drop in the NAHB housing market index overnight, the US flash PMI on Thursday may also be weaker than expected. China's PMIs have been edging lower in recent months, and this may continue when it releases its flash PMI on Thursday. These large economy events pose a threat to global risk appetite. Japanese economic reports have also fallen below expected recently”.
“Chinese onshore swap rates have been relatively stable over the last month, down from their peak at the beginning of the year, but still much higher than levels before Q3 last year, consistent with the PBoC conducting a tighter monetary policy”.
“The PBoC has responded to the recent drop in the 7-day repo rate by draining liquidity reminding the market that it intends to keep policy tighter this year. Longer term rates, 1 to 10 years, have lifted a touch recently and bear watching. The run up in China rates from October last year closely matched the fall in the AUD, a barometer of confidence and risks in the Chinese economy”.
“Chinese equities slipped 1.3% yesterday and other Asian currencies also gave back some recent gains, highlighting the importance of China to global markets. USD/JPY is reversing its gains yesterday as risk appetite begins to look shakier”.
Key quotes:
“With the recent weather effects in the US, apparent in a sharp drop in the NAHB housing market index overnight, the US flash PMI on Thursday may also be weaker than expected. China's PMIs have been edging lower in recent months, and this may continue when it releases its flash PMI on Thursday. These large economy events pose a threat to global risk appetite. Japanese economic reports have also fallen below expected recently”.
“Chinese onshore swap rates have been relatively stable over the last month, down from their peak at the beginning of the year, but still much higher than levels before Q3 last year, consistent with the PBoC conducting a tighter monetary policy”.
“The PBoC has responded to the recent drop in the 7-day repo rate by draining liquidity reminding the market that it intends to keep policy tighter this year. Longer term rates, 1 to 10 years, have lifted a touch recently and bear watching. The run up in China rates from October last year closely matched the fall in the AUD, a barometer of confidence and risks in the Chinese economy”.
“Chinese equities slipped 1.3% yesterday and other Asian currencies also gave back some recent gains, highlighting the importance of China to global markets. USD/JPY is reversing its gains yesterday as risk appetite begins to look shakier”.