Asian Session Forex Recap – Jan. 12, 2016

  • Japanese current account surplus shrank from 1.49T to 1.42T JPY
  • New Zealand ANZ commodity prices down by 1.8% in Dec
  • Japanese consumer confidence rises to 42.7 vs. 42.4 expected, 42.6 previous
  • Japan’s economy watchers sentiment rises to 48.7 vs. 46.7 expected, 46.1 previous

Price action was a mixed bag of nuts during the Asian session, as forex traders cooled down from their selling frenzy.

Major Events:

PBoC applies breaks on more yuan weakness – There were no major news reports today, so attention was focused on what the PBoC is cooking. The central bank had kept the USD/CNY mid-point fix steady today, marking a third day in a row that the officials had stayed away from actively devaluing the local currency.

Word around the hood is that the PBoC is also tinkering with the HIBOR (Hong Kong Interbank Offered Rate – Offshore yuan borrowing rates). The rate rocketed to a record high of 66.82% today, a far cry from the 13.4% offered yesterday.

Recall that one of the reasons for last week’s Chinese equities meltdown is Chinese companies panicking over how fast the yuan was weakening. With so many of them having dollar-denominated debts, they’re using their capital to pay off those debts early in anticipation of a more expensive dollar.

Raising the borrowing rates of offshore yuan not only hints that the PBoC isn’t any hurry to weaken the yuan, but it also gives investors incentive to bring back their offshore yuan home. Unfortunately, China’s moves only served to confuse forex traders more, and resulted to mix trading among the lower-yielding currencies.

More declines for oil – The Black Crack took another beating today, with WTI down by another 1.38% to $30.98 while Brent oil dropped to a 12-year low with a 0.47% decline to $31.43. Yipes!

Major Currency Movers:

JPY – The yen enjoyed a couple more pips today, probably due to Japanese traders catching up from their holiday yesterday. USD/JPY ended the session unchanged after hitting a high of 118.02 while GBP/JPY fell by 21 pips (-0.12%).

AUD – The China-related Aussie took small steps back with AUD/USD slipping by 5 pips (-0.07%) and AUD/JPY dropping by 6 pips (-0.07%). Even AUD/NZD gave up 26 pips (-0.24%) throughout the session.

Watch Out For:

  • 9:30 am GMT: UK manufacturing production (0.1% expected vs. -0.4% previous)
  • 9:30 am GMT: UK industrial production (0.0% expected vs. 0.1% previous)
  • 10:30 am GMT: BOJ Governor Kuroda to give a speech in Paris

See more:

U.S. Session Forex Recap

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