HALISTER1: INSIDE CHINA: Yuan Falls in Thin Liquidity Ahead of Abe’s Speech

INSIDE CHINA: Yuan Falls in Thin Liquidity Ahead of Abe’s Speech

(Bloomberg) -- Yuan declines along with most Asian currencies in risk-averse trade ahead of details on Japan’s stimulus package and a speech by Fed’s Kaplan in Beijing.
  • Trading in HK canceled this morning as a tropical storm passes through the city
  • Offshore yuan dropped as much as 0.22% shortly after 9am, before CNY fixing; move suggests trading is likely to be erratic today as Typhoon Nida, which has been downgraded to severe tropical storm, has kept some workers away from offices, an FX trader in North Asia says
    • Offshore yuan now down 0.11% at 6.6535 per dollar
    • Onshore yuan down 0.10% at 6.6489
    • PBOC weakens CNY fixing for first time in six days, by 0.26% to 6.6451
  • Yuan weakens on tension before speeches by Kaplan and Abe, while some investors also taking profit after yuan’s gain last week, Maybank senior FX strategist Fiona Lim says
    • Huge upside surprise for USD/CNH unlikely; Caixin July PMI suggests momentum of Chinese SMEs is stronger than expected
  • Dallas Fed President Kaplan is to speak on monetary policy at 6:15pm HKT; told Bloomberg Television yday that Sept. rate increase is still possible
    • To watch Kaplan’s interview with Bloomberg, click here
  • Japanese govt to give details on $273b stimulus today
  • CFETS RMB Index likely to slide in coming weeks as it tends to decline when depreciation pressure on yuan is alleviated, Scotiabank Asia FX strategist Gao Qi writes in note today
    • Downward pressure on yuan likely to resurface before Jackson Hole Symposium or major FOMC meetings; USD/CNY yr-end forecast still 6.70
  • Bloomberg synthetic CFETS index falls for second day, at 94.888 today
  • Survey of 77 central banks finds that 32 invest in both onshore and offshore yuan, up from just 3 in 2012, HSBC’s Greater China Chief Executive Helen P.K. Wong says
    • Central banks polled expect to put as much as 6.7% of reserves in yuan assets by 2025, up from 5.5% in last year’s survey
  • Foreigners boosted China bond holdings by most in two years in June
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Fiona Lim (Malayan Banking Bhd)
Helen Wong (HSBC Bank China Co Ltd)
Qi Gao (Bank of Nova Scotia Asia Ltd/Singapore)

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