Asian Session Forex Recap – Jan. 7, 2016

  • AU building approvals posts biggest decline in 3 ½ years
  • AU trade balance shows tighter deficit in November
  • PBoC devalues yuan further, causes risk aversion
  • Chinese equities markets marks shortest ever trading session at 30 minutes

Geronimoooooo!!! Risk aversion struck once again after fears in China’s markets spilled over to the forex market during the Asian session.

Major Events:

China halts stock trading…again – The biggest story of the hour is China’s equities markets clocking in its shortest trading session in its 25-year run. For newbies out there, you should know that a mandatory 15-minute break would take place once the CSI300, an index tracking the 300 largest shares in the country, falls by 5%. Consecutively, trading would completely stop if the index falls by 7%.

Chinese traders made history today when trading had to be halted just 30 minutes (including the initial 15-minute break) after the opening bell. Talk about panic selling! The early closing bell rang with the CSI300 down by 7.2% and Shanghai Composite down by 7.3%. Not surprisingly, the drama encouraged more forex bears to come out from their holiday hibernation.

More Chinese government intervention – China was already off to a rocky start when the PBoC set its USD/CNY mid-point fix to another high just before trading started. The central bank set the fix 0.51% weaker today, its eighth consecutive weakening and the biggest move since August. Meanwhile, possible intervention was also spotted in offshore yuan trading, as the currency strengthened the most in two months following the reactionary drop from the PBoC’s currency fix. With no official announcement from the PBoC, market players reacted to the mixed signals by selling their higher-yielding bets.

Mixed data from Australia – Though attention was centered in China, we also saw some action in the Land Down Under. Australia printed mixed economic reports with its building approvals falling by 12.7% in November, its largest decline in three and a half years. Yipes! The trade balance report balanced (heh) things out though, when it reflected a tighter-than-expected trade deficit for the month. The data clocked in at -2.91B AUD when analysts had estimated a 2.99B AUD deficit following October’s 3.331B AUD deficit figure. Phew!

Major Currency Movers:

JPY and CHF – The low-yielding currencies took advantage of today’s panic in the markets. USD/JPY tested he closely-watched 118.00 handle today while EUR/JPY also dipped to yesterday’s lows and GBP/JPY saw a 55-pip decline. Meanwhile, USD/CHF slid by 39 pips (-0.39%) and GBP/CHF plummeted by 56 pips (-0.38%). Note that the love for low-yielding currencies apparently didn’t extend to the Greenback.

AUD and NZD – High-yielding currencies like the comdolls took the brunt of today’s selling. AUD/USD fell by 26 pips (-0.27%) while AUD/JPY plunged by 65 pips (-0.78%). NZD/USD also saw some losses with NZD/JPY slipping by 30 pips (-0.38%).

Watch Out For:

  • 7:00 am GMT: German factory orders (0.1% expected vs. 1.8% previous)
  • 7:00 am GMT: German retail sales (0.5% expected vs. -0.4% previous)
  • 8:00 am GMT: U.K. Halifax house price index (0.5% expected vs. -0.2% previous)
  • 9:00 am GMT: Italian unemployment rate expected to remain at 11.5%
  • 10:00 am GMT: Euro Zone unemployment rate expected to remain at 10.7%
  • 10:00 am GMT: Euro Zone retail sales (0.2% expected vs. -0.1% previous)

See more:

U.S. Session Forex Recap

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