Market Roundup
- Saudi Arabia Dec Emirates NBD Comp PMI Decreases to 54.4 versus previous 56.3
- Australia building approvals fall 12.7 pct in November (minus 3% expected)
- Australia Nov trade deficit A$2.9 bln (minus 3.1 BLN expected)
- PBOC sets yuan mid-point at 6.5646
- USD/CNH jumped 600 pips in initial response to higher USD/CNH fix
- USD/JPY opened Asia at 118.50 after JPY broadly moved up due to risk aversion
- EZ Retail Sales and sentiment is out later today along with German Ind orders AUD
- China watch saw 0.6630/50 range prevail through to PBOC CNY rate set
- Trading halt called on Shanghai Composite after 7% fall
Economic Data Ahead
- (0200 ET/ 0700 GMT) Germany Industrial Orders
- (0200 ET/ 0700 GMT) Indonesia M2 Money Supply
- (0500 ET/1000 GMT) Eurozone Economic Sentiment
- (0730 ET/1230 GMT) United States Challenger Layoffs
Key Events Ahead
No Major Events Scheduled
FX Beat
USD: The dollar dropped to a 4-month low of 117.66 against the yen amidst present global turmoil. The Fed's December policy meeting minutes suggested further U.S. rate increases would be gradual because of the concerns about persistently low inflation. Against a basket of major currencies, the dollar dropped 0.2 percent to 98.97.
EUR/USD: The euro is up 0.4 percent at 1.0823 with the dollar on the back foot. It has firmed after investors saw a slightly dovish slant in minutes of the Federal Reserve's December meeting. The minutes showed policymakers expressing concerns as inflation could get stuck at dangerously low levels even as they decided to raise interest rates. Currently the pair trades at 1.0817 levels after having touched sessions high of 1.0829 and it is seen trading between the range of 1.0829 - 1.0773. Immediate resistance is located at 1.0838 (Jan 5 High), break above could take the pair to 1.0874 (Dec 18 High). On the downside, support is seen at 1.0711 (Previous Day Low).
USD/JPY: The yen hit multi-month highs against its peers on Thursday after China guided the yuan lower, adding anxiety about China's economy and its policy intentions. The dollar has breached the 118.00 level, going as low as 117.66 yen, a level last seen in late August. The traders continue to be bearish as the pair is seen trading around the 118.00 level. Immediate support is located at 117.66 (Sessions Low), the pair could extend losses if 117.00 level is breached. On the upside, resistance is seen at 119.16 (Previous Day High).
AUD/USD: The Aussie dropped to a 2-month low of 0.7024, having shed more than three percent since the start of new year. The Ausie slumped to multi-week lows on Thursday after PBoC fixed its yuan currency far lower than many expected, spurring speculation that it was aiming for a sustained depreciation to boost exports and on a steep drop in oil prices. Mixed Australian data to alter expectations of a 25-basis point-cut to 1.75 percent by the Reserve Bank of Australia, while Interbank futures implies a 40 percent chance of an easing by April. The pair currently trades at 0.7027 levels after having touched sessions high of 0.7086. On the downside support is seen at 0.7016 (Nov 10 Low), while on the upside, the pair faces resistance at 0.7117 (Nov 18 High). Against its counterpart yen, it dropped more than 1 percent to a 3-month low of 82.65.
NZD/USD: The New Zealand dollar dropped to a 1-month trough of $0.6613. Bank of New Zealand sees the market fair value close to the $0.6400 and expects further downward pressure over the rest of the month. The kiwi is trading weaker on account of weaker than expected manufacturing data out of China which has weighed heavily on commodity currencies and global stock market. The pair currently trades at 0.6636 levels and is seen moving between thin range of 0.6654 - 0.6613. Immediate resistance is seen at 0.6688 (Dec 1 High), break above could take the pair to 0.6705 (Dec 3 High). On the downside, support is located at 0.6607 (Dec 3 Low). Against the yen, it touched a 3-month trough of 77.82 yen.
USD/CNY: The central bank of China set yuan midpoint rate at 6.5646 yuan per dollar, 0.5 percent weaker than the previous fix 6.5314. and the lowest since March 2011. Beijing continues to surprise global investors with unexpected near 2 percent devaluation of the currency. Currencies across the region reeled and domestic stock markets tumbled, as China accelerated the devaluation of the yuan on Thursday. Spot yuan was at 6.5811 in early trade, 256 pips away from the previous close. Offshore yuan dropped to a fresh record low since trading started in 2010 before trimming its losses on suspected intervention.
Equities Recap
Asian stocks dropped to a 3-month low on Thursday after China opted to keep guiding the yuan sharply lower, deepening concerns about the economy and the potential for competitive devaluations by other countries.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.4 percent, hitting its lowest level since late September. Shanghai shares sank more than 7 percent, as trading was halted after the fall triggered a circuit breaker, despite recent supportive measures announced by Chinese authorities, while Taiwan Stocks dropped down 1.7 pct at 7,852.06 points.
Australia's S&P/ASX 200 Index closed down 1.98 pct at 5,021.80 points, while Nikkei slumped down 2.33 pct at 17,767.34 points, with Seoul Shares edged down 0.96 pct.
Commodities Recap
Gold climbed above $1,100 an ounce for the first time in nine weeks on Thursday as investors channelled money into the safe-haven metal amid a global stock market rout, worries over the Chinese economy and heightened geopolitical tensions. Spot gold climbed up to a 9-week high of $1,102.80 an ounce, before paring some gains to $1,098.20 by 0258 GMT. U.S. gold futures also escalated for a fourth straight session to a 9-week high of $1,102.50.
Global benchmark Brent crude futures dropped to new 11-year lows of $33.09 per barrel on Thursday, although prices edged back to $33.52 per barrel by 0213 GMT. Concerns over China's economy, near-record production and slowing demand that have battered prices, adds on fears of a growing global glut. West Texas Intermediate futures set fresh 2009 lows of $32.77 per barrel, with prices edging back to $33.25 by 0213 GMT.
Treasuries Recap
U.S. 10-Year Treasuries yield stood at 2.161 Percent versus previous close of 2.177 percent. The benchmark 10-year note yield dropped 9 basis points to its lowest since mid-December.
Australian government bond futures gained, with the 3-year bond contract climbing up 4 ticks at 98.040. The 10-year contract gained 4.5 ticks to 97.2750, while the 20-year contract was steady at 96.7600.
New Zealand government bonds gained, sending yields 3 basis points lower. Government bonds strongly underperformed swaps late last year, with the 10-year swap-government bond spread moving into negative territory, reflecting offshore behaviour.
Canadian government bond prices rose across the maturity curve on the flight to safety, with the benchmark 10-year rising 42 Canadian cents to yield 1.329 percent and the 2-year price up 7 Canadian cents to yield 0.415 percent.
