MORNING BRIEFING: US, China debate on Yuan heating up; SNB rate decision today

What’s new:
Forex: Yen crawls back up, as markets are still on alert for further intervention
Global Markets: Asian stocks retreat from 5-month high on profit taking
Japan: PM Kan, says authorities will keep intervening to curb yen strength
United States: Geithner sharpens criticism on yuan, saying it was strengthening too slowly
China: Foreign Ministry says yuan appreciation will not solve US’ deficit, unemployment problems
New Zealand: RBNZ keep rates unchanged at 3 percent as expected

Today:


Asian Rates & Indices:
EURUSD: 1.3035 - 1.2976.
USDCHF: 1.0037 – 0.9999.
GBPUSD: 1.5648 - 1.5584.
EURJPY: 111.62 – 110.65.
USDJPY: 85.77 – 85.22.
DowJones: 10'572.73 +0.44%
NASDAQ: 2'301.32 +0.50%
S & P 500: 1'125.07 +0.35%
Nikkei: 9’509.50 -0.07%
Shanghai: 2'600.34 -1.97%
Gold: $ 1'266.80
Crude Oil: $ 75.23

Comments:

T he yen crept higher on Thursday but the market is still on alert for more intervention by Japanese authorities after a massive amount of yen-selling the previous day knocked the yen off a 15-year high against the dollar. Nikkei business daily reported, Japan sold an estimated 2 trillion yen ($23 billion) on Wednesday, a record for a single day, in a move seen as aimed at showing its resolve to curb yen strength.

The market is now awaiting US Treasury Secretary Tim Geithner’s comments later in the day about Japan's intervention, which boosted the dollar by more than 3 percent, its biggest daily gain against the yen in almost two years. Japan's Prime Minister, Naoto Kan, signaled on Thursday authorities would keep intervening to curb the threat the currency poses to the fragile economic recovery.

Meanwhile, US, China debate on yuan’s appreciation seems to be heating up. Geithner stepped up criticism yesterday, saying the yuan was strengthening too slowly, calling on China to allow “significant, sustained appreciation over time” and for the yuan to “fully reflect market forces.”
China’s Foreign Ministry, in defense of the country’s policy, spoke out saying pressure will not solve China’s currency issue. The spokeswoman Jiang Yu told a news conference that “appreciation of the renminbi will not solve US’ deficit and unemployment problems.

The SNB's latest policy decision is due today at 14:00 CET. Expectations are that the SNB will keep rates unchanged, however there are some analysts who believe the Swiss central bank may raise rates by 25 bps as the Swiss government has just raised 2010 GDP growth forecast to 2.7 percent from 1.8 percent.

The RBNZ kept its policy rate on hold at 3 percent and had a dovish policy announcement. The RBNZ noted that the pace of expansion in the global economy “has slowed in recent months with forward looking growth indicators of US growth, in particular, deteriorating noticeably.”

Good Day,

Emman Xuereb
Trading Desk
RTFX Ltd
Risk Disclaimer





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