Daily Kickstart (Currency Chaos Edition)

Another day, another batshit crazy session in RMB world.

The offshore yuan suffered its biggest two-day decline since last June, while the onshore spot was relatively stable after the PBoC weakened the daily fix by the most since June 27. Policy banks were sellers of USDCNY at 6.9340, one trader told Bloomberg.

Offshore liquidity conditions improved a bit as the CNH fell, with O/N CNH HIBOR falling to 14%. “[The] yuan has limited leeway to advance further in face of renewed dollar strength”, Bocom International analyst Karen Tan said in note, adding that “CNH tends to fall shortly after overnight Hibor rate soars, historical data shows.”

The CNHCNY basis narrowed markedly.

yuan

In money markets the closely watched 7-day repo rate dropped 4 bps to 2.29%. The central bank pulled net 595 billion in liquidity last week. Around 110 billion was injected today while only 40 billion in repos matured, resulting in net addition of 70 billion.

Here’s a bullet point summary of comments made by PBoC adviser Fan Gang in an interview with Bloomberg TV:

  • Policy makers won’t likely stop intervention: Fan
  • China doesn’t intervene much with forex reserves: Fan
  • Decline in forex reserves is good news for long term: Fan
  • PBOC wants to see forex reserves decline “smoothly, gradually”: Fan
  • Yuan was overvalued against USD over past 3-4 years: Fan
  • Yuan use has increased despite recent depreciation: Fan
  • China needs fewer forex reserves after yuan inclusion in SDR: Fan
  • Chinese banks’ problems are still manageable: Fan

Elsewhere, the pound collapsed on Monday after comments from UK Prime Minister Theresa May seemed to indicate that a so-called “hard Brexit” is more likely than some kind of watered down version. Controlling immigration, May said, isn’t something she’s prepared to compromise on. Yay, nationalism…

gbp

In other Asian markets, EM FX fell, perhaps responding to the upbeat portions of Friday’s NFP report (e.g. wage inflation). The won was weaker after North Korea suggested Pyongyang was all set to launch an ICBM (lol).

kim

Meanwhile, Australian shares rallied ~1% despite weakness from miners, Japanese bourses are closed for (another) holiday, and  European shares are lower across the board with the exception of the FTSE.

Here’s a wrap via Bloomberg:

  • MSCI Asia Pacific down 0.2% to 138
  • Hang Seng up 0.2% to 22559
  • Shanghai Composite up 0.5% to 3171
  • S&P/ASX 200 up 0.9% to 5807
  • German Nov. Ind. Production Rises 0.4% M/m; Est. +0.6% M/m
  • German November Exports +3.9% M/m; Est. +0.5% M/m
  • Bank of France December Business Sentiment Rises to 102 vs 101
  • Italy Unemployment Rate Rose to 11.9% in November; Est. 11.6%
  • Eurozone January Sentix Investor Confidence 18.2 vs Est. 12.8
  • Eurozone Nov. Unemployment Rate 9.8%; Est. 9.8%
  • Stoxx 600 down 0.4% to 364
  • FTSE 100 up 0.2% to 7228
  • DAX down 0.4% to 11555
  • German 10Yr yield down less than 1bp to 0.29%
  • Italian 10Yr yield down 6bps to 1.9%
  • Spanish 10Yr yield down 6bps to 1.48%
  • S&P GSCI Index down 0.8% to 395.1
  • S&P 500 futures down less than 0.1% to 2271
  • Stoxx 600 down 0.4% to 364
  • MSCI Asia Pacific down 0.2% to 138
  • US 10-yr yield down 2bps to 2.4%
  • Dollar Index up 0.23% to 102.45
  • WTI Crude futures down 1.7% to $53.06
  • Brent Futures down 1.7% to $56.11
  • Gold spot up 0.3% to $1,176
  • Silver spot down less than 0.1% to $16.49

Happy trading.

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