China on Russian oil price cap: The issue is complicated

It is a delicate one and while China cannot outright express their support for Russia on this – or their reluctance to join the pact for that matter – they are at least trying to convince of the optics. The Chinese commerce ministry said that the oil price cap issue is “complicated” and that a solution to all this is to “promote peace talks”. That tells a lot without saying much.

Chinese authorities are eyeing capital controls – concern on flows of funds offshore

A bit of market scuttlebutt/gossip at this stage – China is concerned about capital moving offshore.

With rates rising rapidly in Canada, and the same to come very soon again from the Fed, RBA, and many others, there will be a temptation for yuan holders to seek higher returns elsewhere. China is maintaining low interest ratees as the economy tries to find its feet again after ongoing lockdowns. And there is no guarantee there are not more lockdowns to come given the country’s commitment to its zero policy on coronavirus.

Chinese authorities may be eyeing the flows out of yen:

usdyen 14 July 2022 chart 444

PBOC monetary policy is nothing like the BOJ, of course. But still, yuan could do a bot of a cathc-down to yen, no?

usdcnh 14 July 2022

USD/JPY pops 138.00 for the first time since September of 1998

No stopping the yen slide.

USD/JPY has touched just over 138.00.

The monetary policy divergence between the Bank of Japan and, well, pretty much everyone else, has been stark. And that does not look set to change any time soon. While there have been pullbacks (nothing moves in a straight line) the drivers of yen weakness have remained in place and the yen has kept on sliding.

more to come

usdyen chart 14 July 2022
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