Thursday, October 28, 2021

Risk-sensitive currencies by Evergrande, dollar anchored before Fed

LONDON – Risk-sensitive currencies such as the Australian dollar and Chinese yuan jumped and the safe-haven yen on Wednesday Chinese asset giant Evergrande said it would make an upcoming yuan bond coupon payment, allaying immediate fears of default.

Some of the excitement faded, however, after traders realized it was still unclear whether the developer would be able to pay off the coupon on its offshore dollar bond due Thursday.

The Australian dollar rose 0.49 per cent to $0.7268, up 0.2 per cent on the day to trade the share of gains at $0.7247. The yen weakened 0.2 per cent to 109.43 against the dollar, showing little reaction to the Bank of Japan’s decision to put the policy on hold.

An Australian dollar note is seen in this illustration photo on June 1, 2017. (Thomas White/Illustration/Reuters)

In a note to clients, ING said in a note to clients, “Risk assets are calming down this morning as the People’s Bank of China infuses additional liquidity into the banking system through reverse repurchase agreements after the Chinese markets reopened after a four-day holiday.” pumped through.”

“The news that contributed to limiting losses in Chinese equities was that Evergrande is negotiating interest payments for the 5.8% 2025 bond due tomorrow. As a result, US stock futures are pointing to a positive open.” and the FX market saw a dominance of risk-averse moves this morning with commodity currencies trading against safe-haven.

Bloomberg reported that investors are still nervous about the fate of Evergrande, which on Monday missed interest payments to at least two of its biggest bank creditors.

The dollar index stood at 93.226 in early London trading, not far from Monday’s one-month high of 93.455.

The euro barely jumped at $1.1725, stabilizing on Monday at a one-month low of $1.1700.

Earlier, the general currency fell to a seven-month low of 127.93 yen, as the safe-haven Japanese currency was supported by a cautious mood.

world currencies
world currencies
System of various world currencies including Chinese Yuan, US Dollar, Euro, British Pound, pictured 25 January 2011. (Kepper Pempel/Illustration/Reuters)

The Chinese yuan was fairly stable, rising slightly to 6.4748 per dollar in offshore trade, having bounced back from a one-month low of 6.4878 set on Monday.

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fed liftoff

Another major focus for the day is the US Federal Reserve, which is expected to leave more hints on its future policy path, including when to start reducing bond purchases and when to start raising interest rates.

Expectations are rising that the central bank will signal a plan to reduce its massive bond purchases in November, if data is to be withheld.

The so-called “dot plot,” which charts policymakers’ economic and rate projections, can provide clues on whether the Fed will raise interest rates from current to near zero levels.

Steen Jacobsen, chief investment officer at Saxo Bank, said: “Long-term US Treasury yields continue to remain in a very narrow range and Fed’s expectations remain neutral for weeks, neither risk averse with recent market volatility.” Loaded assets fluctuate.” .

“This suggests a little anticipation of a surprise at today’s FOMC meeting and keeps the bar low for an odd surprise scenario, as the Fed is unlikely to shift current expectations,” said Fed Chair Powell’s dovish on transient inflation. Jackson Hole speech and a less-than-expected August CPI data.

The 10-year US Treasury yield trades within recent ranges at 1.3260 percent.

Elsewhere, the Canadian dollar turned little, gaining on Tuesday after Prime Minister Justin Trudeau won a tight election for the Liberals.

canadian dollar coin, loonie
canadian dollar coin, loonie
A Canadian dollar coin, commonly known as a “looney”, is pictured in this illustration picture taken in Toronto, Ontario, Canada on January 23, 2015. (Mark Blinch/Reuters)

After the decline in the previous session, there was a slight bounce in the cryptocurrency.

Bitcoin rose 5 percent to $42,754 after hitting a 1-1/2-month low of $39,573. Ether jumped 6% to $2,950, falling to $2,732, down more than 30 percent from a four-month peak earlier this month.

The United States on Tuesday unveiled sanctions against a cryptocurrency exchange for its alleged role in enabling illegal payments from ransomware attacks.

by Ritwik Carvalho




This News Originally From – The Epoch Times

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