The yuan is trading below 6.40 against the dollar
That applies to both the offshore and onshore yuan now, with the latter also breaking to its highest levels since 2018 as it trades past 6.40 against the dollar now.
As mentioned yesterday, the thing to note here as well is that Chinese officials and media are not really offering much pushback to the latest strengthening in the currency so that may pave the way for further gains in the bigger picture.
For this week, keep an eye on the PBOC fix in the coming days. If the Chinese central bank is comfortable with a push below 6.40, that’s the first green light.
And in turn, this could translate to some selling in the dollar as well.
China easing up on agriculture spending
The US and China are set for trade talks and it looks like China will play tough. They’ve undershot trade targets in this deal, partly owing to the pandemic but now it sounds like they’re going to play hardball.
The cargoes are said to be less than 1 million tons compared to the 20 million tons that have been purchased this season.
This has caused a bit of risk aversion but the report highlights that it’s more of a domestic issue that part of trade talks. Chinese businesses are evidently shipping corn into free trade zones and blending them for animal feed — something that avoids import tariffs.
I don’t think this dip will last.
The report says that China’s banking regulator has asked lenders to stop selling investment products linked to commodities futures to “mom-and-pop” buyers in order to curb investment losses associated with such products amid volatile prices.
Adding that the regulator has asked banks to unwind existing positions on these products, citing three sources familiar with the matter. One source said that:
“The risk contained in banks’ commodity-linked investments cannot be easily spotted by ordinary investors, neither can they bear it. Banks also don’t have enough expertise to run such products properly.”
This adds to the measures by Chinese authorities as of late to try dial down the speculative rise in commodity prices in general, as seen here
LDP senior official Yamamoto
- Japan likely to proceed with Olympics as scheduled even without spectators
- holding Olympics as planned is good for Japan’s economy
- government should compile extra budget worth 26 trln yen around Oct or Nov
- Japan ‘absolutely’ does not need to keep pledge to achieve primary balance surplus in 2025
- Bank of Japan must seek to weaken yen further by ramping up asset buying
- BOJ is making a mistake by ‘stealth’ tapering of asset buying as deflation still a risk
Kozo Yamamoto is no lightweight, he heads the Liberal Democratic Party’s (LDP) financial research committee.
Yen is off a few ticks only.