Asian Session Forex Recap – Jan. 5, 2016

  • PBoC injects 130B yuan ($19.9B) to calm the markets
  • Japan monetary base (y/y): 29.5% vs. 33.2% expected, 32.5% previous
  • Japan vehicle sales (y/y) rises by 3.1%, its fastest rate in six months

High-yielding currencies took small steps forward, as risk aversion settled a bit among forex traders. Can you guess the catalyst?

Major Events:

PBoC injects funds – The biggest story of the hour is the People’s Bank of China (PBoC) injecting funds in an attempt to stabilize its jittery markets. If you recall, the Chinese markets started the year deep in the red yesterday, enough for authorities to stop trading just after lunch break. Ouch!

Today the central bank is laying to rest speculations of possible tightening by offering 130 billion CNY ($20B) worth of seven-day reverse repos. The plan seems to have worked, as major Chinese indices eventually climbed from their intraday pits.

The benchmark Shanghai Composite (SSEC) erased over 3% intraday loss and has closed at +0.41% for lunch break while Hang Seng cut its dip to 0.02%. Japan and Australia didn’t dance to the same beat though, as Nikkei capped the first part of the day at -0.40% while ASX closed with -1.64%.

Oil price recovery – The Black Crack got a reprieve from yesterday’s losses thanks to investors getting a bit more appetite for high-yielding bets. Brent crude popped up by 25 cents to $37.47 per barrel while WTI also inched 23 cents higher to $36.99 per barrel.

Major Currency Movers:

AUD – The Aussie took advantage of a dampened risk aversion in China and shrugged off weak stocks performance in Australia. AUD/USD is up 27 pips (+0.38%), AUD/JPY is up by 49 pips (+0.57%), and AUD/NZD is up by 54 pips (+0.51%).

CAD – A slight recovery in oil prices went a long way for Loonie fans. USD/CAD dropped by 43 pips (-0.31%) while CAD/JPY jumped by 44 pips (+0.52%) and EUR/CAD slipped by 54 pips (-0.38%).

USD/JPY – Talks of the PBoC’s funds injection not only weighed on the low-yielding yen, but also sparked talks of the central bank possibly buying up USD/JPY. The rumors didn’t have legs though, because the pair only inched 24 pips higher (+0.20%) throughout the session.

Watch Out For:

  • 8:00 am GMT: Spanish unemployment change (-52.6K expected vs. -27.1K previous)
  • 8:55 am GMT: German unemployment change (-7K expected vs. -13K previous)
  • 9:30 am GMT: U.K. construction PMI (56.0 expected vs. 55.3 previous). A top-tier report that usually sets the tone for the pound’s price action for the next couple of hours.

See more:

U.S. Session Forex Recap

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