Yuan gains against USD as PBOC strengthens daily fixing

Tuesday, December 22, 2015

Prospects of additional stimulus in China saw currencies across the region rise with off-shore yuan strengthening for the third straight day. The offshore deliverable yuan exchange rate strengthened 0.2% overnight against the dollar, trading towards 6.5380 at the time of writing, while the Indonesian rupiah as well as the Aussie dollar and Kiwi dollar all posted additional gains against the dollar. Expectations that the Chinese central bank could introduce more stimulus prompted the rally across the region with policymakers in China stating that monetary policy needed to be more “flexible” while fiscal spending needed to be more “forceful”.

The PBOC offered up additional support to the Chinese currency, strengthening the daily fixing for the yuan on Monday and bringing an end to the recent streak of weakness which has seen onshore renminbi lose 1.5% against the dollar over the past two and a half weeks. After touching a fresh four year low against the USD the yuan has stabilised just below 6.4800 and with the PBOC setting the fix 0.09% stronger on Monday its clear that the central bank wants to send a message to market participants; that they shouldn’t expect a continued weakening of the currency.

Front month Brent futures are holding around their eleven year lows this morning as negative investor sentiment for the year ahead saw appetite for the global benchmark drop. While demand has for the most part remained relatively stable throughout the year growing supply put considerable pressure on near month contracts and the expectation is for the crude glut to continue rising as both OPEC and non-OPEC production increases. Front month Brent futures traded at a low of $36.04/bbl yesterday, bringing year-to-date losses to just over 36% and with storage facilities quickly filling up and inventories around the world climbing steadily it looks as if hopes for a rebound in crude oil markets next year are quickly starting to fade.  

Onshore yuan gains against dollar as PBOC strengthens daily fix

CNY Curncy China Renminbi Spot 2015 12 22 07 37 54

Front month Brent futures hit 11 year low 

CO1 Comdty Generic 1St CO Fut 2015 12 22 08 06 15

Events for today

0700

DE

Jan

GfK Consumer Confidence

0930

UK

Nov

Public Finances (PSNCR)

1330

US

Q3

GDP

1330

US

Q3

Personal Consumption

1500

US

Nov

Existing Home Sales

1500

US

Dec

Richmond Fed Manufact. Index

Topics: Crude oil, Brent, PBOC, OPEC
More from: Kash Kamal