Article / 14 August 2015 at 1:00 GMT

Morning Report APAC: CNY calm ensues but oil takes a hit

APAC Sales Trading Desk / Saxo Capital Markets
  • Market likely to remain wary after the PBOC intervention in the spot market
  • CNY fixing came in at 6.4010 yesterday despite a previous spot close of 6.3874
  • EUR dropped after the retail sales data in the US but rallied back quickly

By Saxo APAC Sales Trading

Economic Data of the Day (Singapore Time)

1300: SGD – Retail Sales SA MoM (Prev. 2.4%), YoY (Prev. 6.1%), Ex Autos YoY (Prev. 0.9%)
1330: EUR – France GDP YoY Q2 (Prev. 0.8%), QoQ (Prev. 0.6%)
1400: EUR – Germany GDP YoY Q2 (Prev. 0.3%), QoQ (Prev. 1.0%)
1600: INR – Wholesale Prices YoY July (Prev. -2.40%)
1700: EUR – Eurozone CPI YoY (Prev. 0.2%), MoM (Prev. 0.0%), Core CPI (Prev. 1.0%)
2030: USD – PPI Ex Food and Energy MoM (Exp. 0.1%, Prev. 0.3%), YoY (Exp. 0.5%, Prev. 0.8%)
2130: USD – Industrial Production MoM (Exp. 0.3%, Prev. 0.3%)
2200: USD – University of Michigan Sentiment (Exp. 94.0, Prev. 93.1)

10.15am: AUD – RBA’s Kent to gives a speech in Brisbane

Overnight news

  • CNY fixing came in at 6.4010 yesterday despite a previous spot close of 6.3874
  • People's Bank of China deputy governor Yi Gang said a number of points including:
-    Flexible exchange rate will increase room for central bank to adjust monetary policy;
-    There is no need for China to promote exports by adjusting exchange rate;
-    China is promoting capital account convertibility according to existing agenda;
-    It won’t change schedule due to market volatility or external factors;
-    Possible extension of trading hours is in consideration of future connections with overseas markets;
-    Chinese regulators should believe in the market, respect the market and follow the market;  Managed floating exchange rate regime is suitable for China;
-    PBoC has already exited from regular intervention on yuan;
-    ‘Nonsense’ saying that China intends to devalue yuan by 10% to boost exports;
-    Current exchange rate level consistent with China’s economic fundamentals
  • Bank of Korea decided to keep the BOK 7-Day Repo Rate at 1.50% as expected yesterday
  • US Retail Sales came at 0.6% MoM as expected with an upward revision from the previous month to 0.0% from -0.3%
  • Recession deepens in Russia but Russian Central Bank opposes the idea of capital controls  and will review its economic forecasts by September 11
  • Oil price touched a 6-year low, hitting $41.35

Foreign Exchange
The market calmed down yesterday in USDCNH despite the high fixing. The market is probably wary after the PBOC intervention in the spot market and comments from them saying that the level had become more balanced now.

So we are back in the commodity story and oil touching a 6-year low at 41.35. USDCAD rallied back above 1.3000. Despite a stronger than expected GDP yesterday in Malaysia at 4.9% (expected 4.5%), USDMYR rallied overnight in NY to close at 4.0515 In the 1M NDF, NZD moved 1% lower yesterday but a support at 0.6500 has been created the past month.
USDBRL also rallied 1% overnight as well as USDMXN which is close to test again 16.50

dropped after the retail sales data in the US but rallied back quickly after and it seems that the momentum of higher EURUSD is holding well. The main story of weaker commodity currencies and EM is far from being over and with oil testing new lows, we should expect USD to remain bid against these currencies.

Foreign exchange movements
The market calmed down yesterday in CNH and the volatilities have been coming off in the pair dropping around two volatilities. Most of the movements in the G10 space also came off yesterday on a quieter market  but we should see what the fixing in CNY brings us today and whether oil breaks the 40 level which would trigger another round of USD buying.



A calmer market in the Chinese market and US retail sales which came in as expected pushed rates higher by 3 basis points.



The biggest European decline since October was put aside on Thursday, as a stabilisation in the yuan offered some relief and focus was on Nestle and tour operator TUI which rallied after reporting earnings.
  • Nestle rose 2.7% reported greater-than-expected H2 sales, despite the recall of its Maggi noodles in India; and stuck to its 2015 outlook
  • TUI, tour operator, spiked 6.6% after announcing FY profit growth at the upper end of its forecast
However, US stocks fluctuated overnight and then closed largely unchanged, as anxiety over China eased, while investors focused on solid July retail sales bolstering potential for a rate hike in September.  With WTI continuing to slide, energy companies also continued its retreat. Consol Energy and Transocean fell more than 6.5%.

With oil at $41.35 and weakening, it is the real story of the moment. Photo: iStock

-- Edited by Adam Courtenay

This report was compiled by the Saxo APAC Sales trading team in Singapore – the home of social trading. Follow the team on @SaxoStrats or post your comment below to engage with Saxo Bank's social trading platform. Follow us on @SaxoStrats on Twitter

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