Forex news for Asia trading Wednesday 6 January 2016

Despite all assurances of the yuan to not weaken much more, the People's Bank of China sharply devalued the CNY again today. North Korea responded with "thats not a bombshell, this is bombshell", detonating a hydrogen nuclear device in a test.

North Korea:

  • Comments from Japan PM Abe on North Korean nuclear test
  • North Korea TV says North Korea leader Kim conducts hydrogen nuclear test
  • How to detect a nuclear explosion
  • North Korea to make 'special announcement' at 12.30pm
  • More on that Nth. Korean its not an earthquake it a nuclear test
  • North Korean 'earthquake' appears to be due to a nuclear test

China:

  • China - Shanghai Composite up 0.7%
  • China - Caixin December Services PMI: 50.2 (prior 51.2) & Composite: 49.4 (prior 50.5)
  • China stock markets open a little higher
  • AUD and NZD / yen getting smashed
  • China to keep ban on major shareholders offloading shares until new rules promulgated
  • PBOC sets USD/CNY mid-point today at 6.5314
  • China Securities Journal says little risk of further sharp yuan depreciation
  • China stockmarket sellers ... let the arrests begin!
  • China - about 30 companies gave a commitment that they "will not sell shares"
  • China - Goldman Sachs sees limited room for further yuan falls
  • Charts from the RBA out now (how about some technical analysis on the Aussie chaps?)
  • UK data - BRC shop price index for December: -2% y/y (prior -2.1%)
  • Japan stocks - Sharp likely to post operating loss
  • Japanese corporations hesitant on base pay increases
  • Australia - AiG Services PMI for December: 46.3 (prior was 48.2)
  • HSBC on the AUD and RBA: "may ... encourage the Australian dollar lower"
  • Oil - American Petroleum Institute (API) data - Inventories fall 5.6 mln bbls

OK, lets take this day from the top.

American Petroleum Institute oil stockpile data hit during the late NY Tuesday afternoon, as usual, with a big fall in inventories (but builds at Cushing and in gasoline, distillate stocks). The oil price response was restrained, though and it hasn't done a real lot during the time zone here.

Minor data followed from Australia (another slipping in the services PMI, which while I've said is minor, its certainly a concern, the service sector is being looked to provide economic growth in the wake of the end of the mining investment boom) and the UK (shop price deflation continues still).

As we approached the yuan fix and the following Chinese stock markets opening Chinese press carried plenty of pieces that should have served to support equities (extension of the selling ban etc.)

The PBOC set the USD/CNY mid-point at a fresh 4.5 year high (yuan weak) with the biggest weakening for the fix in 2 months. Meanwhile, CNH traded at a 5 year low. The surprise sharp devaluation saw an immediate response with a higher yen and lower AUD and NZD.

Following on a few minutes later , China stock markets opened ... higher. And then consolidated gains throughout the morning China session. Not large gains, but positives nonetheless.

An 'earthquake' was then reported in North Korea. This was revised to a 'man-made' earthquake as the cause was soon attributed to nuclear device test.

Forex movement had all but died by then, the yen gave back a few points (USD/JPY up around 40 or so points from its post yuan-fix low at one stage) while AUD and NZD ticked back a few points also.

EUR, CHF, GBP were not really where the action was during the timezone, but EUR/USD did manage a 30 or so point gain from its lows at one stage before giving most of it back.

Gold dipped a few dollars, recovered and is barely changed on the session as I update.

Regional equities with Shanghai closed for the lunch break:

  • Nikkei -1.10%
  • Shanghai +0.69%
  • HK -0.92%
  • ASX -1.10%

Still to come:

  • Preview of the FOMC Minutes from RBC
  • Federal Reserve FOMC December meeting Minutes due Wednesday - what were they thinking???