Asia followed up the ‘on hold’ Federal Open Market Committee (FOMC) decision, with a hawkish dot plot, by buying US dollars during the session. EUR, GBP, NZD, NZD, AUD (and yuan, but I’ll come to that in a bit) all fell against the big dollar. But yen was the biggest loser. USD/JPY took a peek above 141, and its not too far from above there as I post. That was up over 100 points from the session low. The sharp move down for yen (up for yen crosses) prompted some verbal intervention from Japan’s chief cabinet secretary Matsuno. It was weak stuff, along the usual lines including:

Yada, yada, yada. If you’d like to know what to listen out for when Japanese authorities get serious about signalling actual intervention, check out this post here:

Meanwhile, it was busy from China today. We had the People’s Bank of China make another rate cut. A 237bn yuan one-year Medium-term Lending Facility (MLF) was issued, at a reduced interest rate of 2.65%, from 2.75%

The PBOC had already cut two other policy rates this week:

The Bank is expected to cut Loan Prime Rates next week. This is scheduled for Tuesday the 20th. Current LPRs are:

  • 3.65% for the one year
  • 4.30% for the five year

After the PBOC rate cut we had data from China indicating slower-than-expected industrial output and retail sales growth in May. Other data was also a little dour. However, the data point that is really going to concern the Chinese Communist Party Politburo is that youth unemployment in China hit a record high of 20.8% in May. This’ll keep stimulus speculation on the boil. A faster-growing China would be a positive input for the global economy.

The offshore yuan weakened further on the session. USD/CNH popped briefly to highs circa 7.19.

We also had instructive data from Australia today. The May jobs market report showed massive beats on jobs added and unemployment. Australia’s yield curve inverted for the first time since the 2008 global financial crisis as speculation of further Reserve Bank of Australia rate hikes intensified and recession risks heightened. Speaking of recession, Q1 GDP data from New Zealand during the session confirmed the country had slipped into recession; it was the second consecutive quarter of negative q/q GDP i.e. economic contraction. This is the commonly accepted definition of an economic recession.

Asian equity markets:

  • Japan’s Nikkei 225 +0.3%

  • China’s Shanghai Composite +0.2%

  • Hong Kong’s Hang Seng +0.6%

  • South Korea’s KOSPI -0.4%

  • Australia’s S&P/ASX 200 +0.25%

usdcnh chart mlf pboc rate cut wrap 15 June 2023