Weaker Chinese FDI sees yuan trade above 6.150 against USD

Tuesday, September 16, 2014

Weaker than expected FDI exacerbated concerns regarding slower Chinese growth after figures released overnight showed foreign direct investment slipped to a four year low, contracting by 14% against expectations of a modest 0.8% increase y/y as investment totalled $7.2bn in August. The significant slowdown compounded the previous month’s 16.9% drop in FDI and marked the first consecutive double digit decline in FDI since 2009 and further added pressure on policymaker in Beijing to step up supportive efforts. With investment from external sources slowing the increasing reliance on debt to support expansion could add further stress to an already risky financial sector. The yuan traded above 6.1500 against the dollar for the first time since late August, weakening for the third straight session as investors increased dollar holdings on the data and ahead of this week’s FOMC meeting.

The dollar traded around a six year high against the yen in the lead up to the September FOMC meeting starting today. After posting steady losses against the dollar throughout August and the first half of September the yen has held firmly above 107.00 this week as investors speculate on the timing of the first interest rate increase since 2006. The dollar index was also buoyed around a 14-month high, holding firmly above 84.1000 throughout the past week and finding firm support around this level yesterday to post gains towards 84.400. Investors will glean further details on the health of the US economy from inflation data expected later this afternoon in the build up to tomorrow’s release of the FOMC rate decision as well as Yellen’s press conference.

Three month LME aluminium prices stabilised around $2,000/tonne in early morning trade after last week’s trading saw an extension of the precipitous declines which have dominated activity over the previous seven trading sessions. Prices hit a year-to-date high just below $2,120/tonne at the start of the month before shedding 5.6% since last Monday, with yesterday’s session alone seeing a 2.2% cut in prices on the weaker than expected Chinese data. However, with prices dipping briefly towards $1,980/tonne technical support levels managed to hold firm and activity early this morning has seen intraday gains back above $2,000 towards $2,010/tonne as investors take advantage of the buying opportunity.

Chinese FDI falls to lowest levels since 2009

CNDIINVY Index China FDI Foreig 2014 09 16 07 31 50

Yuan trades above 6.150 against the dollar

CNY Curncy China Renminbi Spot 2014 09 16 07 38 28

JPY holds near six year lows

JPY Curncy Japanese Yen Spot 2014 09 16 07 56 22

3-M aluminium prices find tentative support around $2,000/tonne

LMAHDS03 Comdty LME ALUMINUM 3 2014 09 16 08 07 13


Events for today

0930

UK

Aug

CPI & PPI

1000

EZ

Q2

Labour Costs

1000

DE

Sep

ZEW Economic Survey

1330

US

Aug

PPI Core

All times UK Local Time

Topics: USD, Aluminium, JPY, CNY, LME
More from: Kash Kamal