There
were yuan deposit rate cuts by a range of Chinese banks today after
calls from the authorities to do so. The cuts are aimed at providing
a boost to the economy and have sparked renewed speculation of a Loan
Prime Rate cut from the People’s Bank of China this month. As a
reminder, the Medium Term Lending Facility (MLF) rate is set by the
People’s Bank of China each month on the 15th
(or the nearest business day if this falls on a weekend) with the
Bank’s Loan Prime setting on the 20th
(ditto). The 15th
is a week away, the 20th
nearly two.
The
yuan (CNH) had lost ground overnight. USD/CNH had climbed above 7.15
for the first time in 2023 and it retested above there during the
session here. The People’s Bank of China is allowing the yuan to
slide, the CNY reference rate was set weak (USD/CNY higher) again
today.
The
news of lower rates in China to spur the economy and the lower yuan
likewise provided cross-currents for China and China-proxy trades,
such as AUD. Stimulus is a positive but the lower yuan will make
imports into China more expensive, not a positive for the global
economy. AUD/USD inched a little net higher in a very narrow range.
EUR, NZD, GBP, CAD and even yen all similar.
Other
news took a back seat to what was happening in China. OK, I
exaggerate, there was no other news. Data flow, however, included
better than expected Q1 economic growth data (GDP) from Japan and a
miss on Australian exports in April.
Asian
equity markets:
-
Japan’s Nikkei 225 -0.1%
-
China’s Shanghai Composite -0.1%
-
Hong Kong’s Hang Seng -0.2%
-
South Korea’s KOSPI -0.3%
-
Australia’s S&P/ASX 200 +0.04%