Forex news for Asia trading on Friday 22 October 2021
- Reports that China has waived tax collection for coal miners, heating firms
- China's SAFE says yuan and cross border capital flows are basically stable
- Reuters poll shows ECB expected to hike in 2024, with the risk of earlier
- US President Biden spoke on spending negotiations
- Evergrande made a debt repayment, there is another due next Friday (October 29)
- NY Fed President Williams comments on inflation, house prices
- Risk FX comes back into favour after the news of Evergrande debt repayment
- PBOC sets USD/ CNY mid-point today at 6.4032 (vs. estimate at 6.4030)
- Reports Evergrande has paid $83.5m bond interest payment
- Markit Japan preliminary PMI for October, Manufacturing 53.0 (expected 51.4)
- RBA to buy April 2024 Australian government bonds, up to AUD 1bn
- US President Biden says he thinks he is close to a deal
- South Korea is to temporarily cut fuel taxes
- AUD/USD technical analysis, outside reversal day
- Bank of Japan meets next week - today's CPI data cements downgrades expected
- Japan CPI data for September, headline +0.2% y/y (vs. expected -0.8%)
- UK data - GfK Consumer Confidence for October -17 (expected -15, prior -13)
- The US is planning a Xi-Biden virtual summit for next month
- Nissan Motor will slash planned global production for October & November by 30%
- Australia preliminary PMIs October: Manufacturing 57.3 (expected 58.6)
- RBA Governor Lowe spoke earlier - sees inflation as transitory (but there is a but)
- New Zealand new approach to COVID-19 restrictions, 90% vaccination rate
- ICYMI - Putin said OPEC+ countries are increasing oil output a bit more than agreed
- Trade ideas thread - Friday 22 October 2021
- BoE chief economist says UK inflation likely to hit 5% & November meeting is live
I'll get to Evergrande in a moment, it was market-moving news, but before that a couple of notes on some other developments.
Snap shares fell sharply in after-hours extended trading after the company missed Q3 revenue expectations and gave wary guidance for the quarter ahead. Snap's advertising business revenue fell with Apple's privacy changes introduced earlier this year cited by analysts; of concern also is the supply chain tightness seeing advertisers pull back on advertising products that may not be available for some time. Other social media and digital advertising stocks also saw price drops in after-hours trade.
Around the same time we had reports on remarks from the new Bank of England chief economist, Huw Pill, saying UK inflation is likely to head close to or above 5% early in 2022 and that the Bank no longer needs the emergency policy settings like after the pandemic intensified. All inputs for those looking for earlier BoE hikes (November is a possibility).
A little later in the morning the Reserve Bank of Australia was buying April 2024 bonds in order to lower the yield on those bonds towards the stated RBA target of 0.1%. It had been as high as circa 0.17% and there was some (mild only) speculation in the market the RBA was dialling back its commitment to holding rates low. I should note its not likely the RBA would make such a policy change without at least some sort of verbal signalling prior to dropping its commitment. Having said this the Bank did take quite some time to enter the market to drive the yield back towards target, today's bond-buying was the first from the RBA since February.
The Australian dollar dribbled just a few tics lower after the RBA buying.
This brings us to Evergrande. The firm paid USD83.5m, which was due on September 30. There was a 30-day 'grace' period before a default would have been registered. Evergrande made payment just a few days ahead of that running out. AUD, NZD, CAD and GBP all rallied on the news, as did USD/JPY. EUR/USD was slow. Yen crosses, thus, moved higher.
Slipping by almost unnoticed was the news that Fitch Ratings has downgraded another China property development firm, Sinic, to Restrictive Default and withdrawn ratings.
From the People's Bank of China today we had another large injection of funds through open market operations, the third day in a row the PBOC net injected 90bn yuan. For the week the total injection is a substantial 260bn yuan.
AUD/JPY had a quick rise on the Evergrande news but has since given some back:
