We need to find a fairer way of providing Goods and Services to the rest of the people on Earth.Cryptocurrencies and/or Gold Standard of money....maybe the answer to fight hyperinflation caused by too much printing of paper/fiat currencies by Governments and Central Banks all over the World. (https://nomorefiatmoneyplease.blogspot.com)
China cuts yuan against US dollar by 1.62%: Xinhua
China cut the value of the yuan against the dollar by 1.62 per cent on Wednesday, the official Xinhua news agency said, the second reduction in two days.
PHOTO: AFP
[SHANGHAI] China cut the value of the yuan against the dollar by 1.62 per cent on Wednesday, the official Xinhua news agency said, the second reduction in two days.
The daily fix that sets the value of the Chinese currency against the greenback was lowered to 6.3306 yuan, from 6.2298 on Tuesday, Xinhua quoted national foreign exchange market data as showing.
China's unexpected sharp currency devaluation Tuesday shook the foreign-exchange market, boosting the dollar and stirring concerns about a delay in the Federal Reserve's plan to raise interest rates.
PHOTO: EPA
[NEW YORK] China's unexpected sharp currency devaluation Tuesday shook the foreign-exchange market, boosting the dollar and stirring concerns about a delay in the Federal Reserve's plan to raise interest rates.
China's central bank devalued its yuan currency Tuesday by nearly two per cent against the US dollar, as authorities said they were seeking to push market reforms in a one-time move.
The dollar strengthened against most major rivals except for the euro, which rose slightly against the greenback, gaining a lift from Greece's agreement with its creditors for a third bailout.
The People's Bank of China (PBoC) said Tuesday it would now base the fixing on the previous day's close and other factors, a new method of calculating the daily price. Previously the central bank would allow the yuan, also known as the renminbi, to vary by up to two percent of the central rate.
The dramatic move surprised markets and led to a wave of selling on US and European equity bourses, as well as across many commodity exchanges.
The PBoC's decision to loosen the dollar-yuan trading band "will have far-reaching implications," said Christopher Vecchio, currency analyst at DailyFX.
"Look no further than the fact that the PBoC released an explanation of its monetary policy decision in English: the PBoC is well-aware the world is watching Chinese economic and financial markets, and is doing all that it can to maintain control over a spiraling situation." Forex.com analyst Fawad Razaqzada said that "the market has interpreted the move as a sign that the health of the Chinese economy is probably worse than even what the official data suggests." Analysts wondered about the devaluation's impact on the timing of the Fed plan to raise its near-zero federal funds rate this year, dependent on whether the economy is strong enough to withstand a rate hike.
"China's currency move laid down another potential obstacle to an imminent Fed rate hike. Not everyone is on board with the notion the Fed would boost rates at its coming meeting in mid-September, with (the) economy continuing to flash mixed signals," said Joe Manimbo, senior market analyst at Western Union Business Solutions.
IMF welcomes China's new yuan mechanism, no impact on SDR push
The International Monetary Fund welcomed China's move to devalue the yuan and said it doesn't directly impact the country's push to win reserve currency status
PHOTO: AFP
[BEIJING] The International Monetary Fund welcomed China's move to devalue the yuan and said it doesn't directly impact the country's push to win reserve currency status.
The comments by the IMF came as China cut the value of the yuan for a second day after surprising markets on Tuesday when it lowered the yuan's value by the most in two decades. The central bank said the move would allow the market to play a greater hand in setting the currency's value. Economists said the decision was also likely taken to boost exports.
The People's Bank of China on Wednesday set the yuan's reference rate at 6.3306 per dollar, 1.6 per cent lower than Tuesday's level.
"The new mechanism for determining the central parity of the Renminbi announced by the PBC appears a welcome step as it should allow market forces to have a greater role in determining the exchange rate," the IMF said in a release. "The exact impact will depend on how the new mechanism is implemented in practice." On China's push for the yuan to be included in the IMF's basket of reserve currencies, known as the Special Drawing Rights or SDR, the Washington-based fund said the devaluation won't directly impact its decision
"Regarding the ongoing review of the IMF's SDR basket, the announced change has no direct implications for the criteria used in determining the composition of the basket," the IMF said. "Nevertheless, a more market-determined exchange rate would facilitate SDR operations in case the Renminbi were included in the currency basket going forward."
Currency rout goes global as ex-IMF economist Jen sees risk of 50% loss on China
As bad as things are for emerging- market currencies, China is about to make them a whole lot worse.
PHOTO: BLOOMBERG
[NEW YORK] As bad as things are for emerging- market currencies, China is about to make them a whole lot worse.
Its devaluation of the yuan risks a new round of competitive easing that may send currencies from Brazil's real to Indonesia's rupiah tumbling by an average 30 per cent to 50 per cent in the next nine months, according to investor and former International Monetary Fund economist Stephen Jen.
Volatility measures were already signaling rising distress in emerging markets even before China's shock move. An index of anticipated price swings climbed above a rich-world gauge at the end of July, reversing the trend seen for most of the past six months.
"If this is the beginning of a new phase in Beijing's currency policy, it would be the biggest development in the currency world this year," said Mr Jen, founder of London-based hedge fund SLJ Macro Partners LLP. "The emerging-market currency weakening trend is now going global." Latin America is a particular concern because of the region's high levels of corporate debt, said Jen, who predicted the 1997 Asian crisis as a strategist at Morgan Stanley.Commodity Exporters The yuan tumbled 1.8 per cent to close at 6.3231 per dollar in Shanghai Tuesday, the biggest one-day drop since China unified official and market exchange rates in January 1994.
Mr Jen recommends selling the real, rupiah and South African rand - all currencies of commodity exporters, which rely on China for a large chunk of their foreign earnings. The Bloomberg Commodity Indexhas dropped 11 percent since mid-year as the world's second-largest economy suffers its sharpest slowdown since 1990.
China's move to end the yuan's de facto peg with the dollar, and the potential for a new currency war as its trading partners react, is only the latest catalyst for declines in emerging-market currencies.
As well as the drop in raw-materials prices, the prospect of higher interest rates in the US has also drawn away investment, pushing a Bloomberg indexof emerging-market exchange rates down 20 per cent in the past year. A Latin American measure headed for its 13th monthly loss out of 14, while an Asian gauge plunged Tuesday to its lowest in six years.Currency Wars China's devaluation will spark another wave of declines, said David Woo, Bank of America Corp.'s head of rates and foreign-exchange research in New York. The Asian nation is vital to the global economy, accounting for about 27 per cent of growth.
"This will trigger competitive devaluation around the world that will start in Asia but definitely not end in Asia," said Mr Woo, who's been predicting China would act since January.
JPMorgan Chase & Co's index of volatility for emerging- market currencies climbed to 9.3 per cent this week, about 0.1 percentage point higher than a Group-of-Seven measure. It rose above the developed-nation gauge on July 31 for the first time since May.
Strategists surveyed by Bloomberg anticipate declines in 19 of the 31 leading emerging-market currencies by the middle of next year, with those from Latin America and Eastern Europe seen as the biggest losers.
Morgan Stanley cautions against being too bearish. Investors betting currencies will weaken should limit their potential losses because China will follow its devaluation with fiscal-stimulus measures to boost the economy, its strategists said Tuesday in a note.
"Asian currencies in particular should remain under pressure from the devaluation," wrote strategists including London-based head of foreign-exchange strategy Hans Redeker. "However, stops need to be tight."
One of China's most popular trades may be coming to an end
Years of the Chinese yuan practically pegged to the US dollar gave succor to a massive carry trade that involved mainland speculators borrowing from overseas banks at relatively low rates and then investing in higher-yielding renminbi-denominated assets.
PHOTO: BLOOMBERG
[NEW YORK] Years of the Chinese yuan practically pegged to the US dollar gave succor to a massive carry trade that involved mainland speculators borrowing from overseas banks at relatively low rates and then investing in higher-yielding renminbi-denominated assets.
Pocketing the spread between the two netted hefty returns, but the era of "peak" China carry looks to be coming to an end following China's move to devalue its currency.
The carry trade is unknown, the Bank for International Settlements estimates that dollar borrowing in China jumped five-fold since 2008 to reach more than US$1.1 trillion. Global dollar borrowing is something like US$6 to 9 trillion, according to the BIS, thanks largely to an emerging market borrowing spree.
Trade unwind will now depend largely on the pace of the dollar's appreciation. It's doubtful that Chinese authorities want to see a disorderly unwind of any sort.
The flipside is that China still has some pretty impressive foreign exchange reserves, which could soften the blow from an unwind of the carry trade. The devaluation may also have the added benefit of taking some of the froth out of a Chinese market that has arguably been overheated by foreign borrowing.
Automakers feel China heat as buyers burnt by stocks rout desert showrooms
The great Chinese stock slump that first whacked luxury car sales is spreading to mass-market brands as wannabe customers like Zhang Jiabin count the cost of soured investments.
PHOTO: AFP
[BEIJING] The great Chinese stock slump that first whacked luxury car sales is spreading to mass-market brands as wannabe customers like Zhang Jiabin count the cost of soured investments.
The 37-year-old food company executive lost nearly US$6,500 when shares tumbled in June and July, and can't now afford the new Volkswagen Tiguan sport-utility vehicle he had his eye on."I can't draw money," Mr Zhang said, "I'll wait until (the market) goes up." Auto analysts and officials worry that July data released later on Tuesday will show a bigger slide than June's 2.3 per cent drop in the world's biggest car market. As many more who lost out in a trillion-dollar share slump join Mr Zhang in delaying purchases, a fourth successive month of decline would be China's weakest sales streak since the 2008 global financial crisis.
With brands from Ford Motor Co and Nissan Motor Co already having reported weak sales, global automakers now fear a sustained period of dwindling demand and depressed prices. That will squeeze profit, create an inventory burden for dealers and ramp up already-fierce competition.
China-based managers and executives at major global automakers say that leaves companies now pushing staff hard to meet targets despite the bleak outlook. Gloom over China's economy was highlighted on Tuesday when it devalued the yuan after a run of poor economic data.
At Volkswagen AG, China's best-selling car brand, a regional manager at a sales subsidiary said the automaker is pressing for staff to continue to meet targeted sales numbers to protect its market share, forcing inventory on dealers that will bite into their profit. "The dealers are the first to cry," the manager said, referring to tensions with the automaker.
A Volkswagen spokeswoman said financially healthy dealers are part of the company's strategy as "only satisfied dealers guarantee satisfied customers."
LIMITED OPTIMISM
At Ford, sixth-largest by sales in China, officials are working to find ways to match uncertainty over the future of sales trends with the necessity to plan production. Last Friday the automaker said it sold 6 per cent fewer cars in July than in the same month last year, doubling the year-on-year decline from June. "The next two to four months will be the most important and also the most difficult," said one person close to Ford with knowledge of production plans. Short-term production adjustments are growing more frequent, he said, leading suppliers to incur greater costs. "Any changes to the manufacturing plan of finished cars will effect thousands of parts, thereby influencing hundreds of suppliers," he said.
A Ford spokeswoman said production adjustments are normal even with only a few days and weeks of lead time. Any adjustments are in accordance with supplier contracts, she said.
While optimism is in short supply, Honda Motor Co and Toyota Motor Corp have shown one way forward, hoisting sales thanks to recent launches of new, ever-popular SUVs.
Some analysts even predict a return to sales growth later this year as the stock market stabilises. They see expansion in high-single digit percentages next year, the strongest sales since 2013, bearing in mind that China still has low levels of car ownership compared with mature markets in the United States and Europe.
Gold thumped as China's yuan devaluation spurs rally in dollar
[SINGAPORE] Gold retreated after China weakened the yuan's daily reference rate by the most in two decades to combat a slump in exports from Asia's top economy, boosting the dollar and hurting demand for bullion.
Gold for immediate delivery lost as much as 1 per cent to US$1,093.95 an ounce and traded at US$1,099.23 at 1:30 pm in Singapore, according to Bloomberg generic pricing. The metal rose to US$1,109.08 on Monday, the highest level since July 21.
Bullion has dropped 7.2 per cent this year as prospects for a US interest rate rise boosted the dollar, and China's move on Tuesday added further impetus to a stronger greenback. Goldman Sachs Group Inc. has forecast gold will probably drop below US$1,000 as US borrowing costs climb and investors cut holdings in bullion-backed exchange-traded products.
"Many people in the market have been expecting a devaluation but just not a one-off, 2 per cent adjustment immediately on the yuan fixing," Wallace Ng, a trader at Gemsha Metals Co, said from Shanghai. "It will lead to dollar strength, which is bearish for dollar-denominated gold." While China is the biggest gold producer and consumer and meets some demand from local output, it also buys metal from overseas and a weaker currency will make imports more expensive. Local purchasing power will drop, said Ng.
Policy makers in China are seeking to bolster growth after trade data at the weekend showed that overseas sales tumbled more than expected in July. The unprecedented change to the fixing came after the People's Bank of China said earlier on Tuesday that a strong yuan was putting pressure on exports.
After the fixing rate was cut 1.9 per cent, the Bloomberg Dollar Spot Index strengthened 0.5 percent, taking gains over the past year to 19 per cent. The yuan fell 1.9 per cent to 6.327 per dollar in Shanghai, and slid 2.3 per cent in offshore trading in Hong Kong.
The move also triggered a rally in Chinese gold equities as their cost of production in yuan declines while the metal is sold in dollars. Shares of Zhongjin Gold Corp and Shandong Gold Mining Co. surged by the exchange-set limit of 10 per cent at the 11:30 am midday break.
The change worsened gold's "outlook when it is already under pressure from weakening physical demand from the exchange- traded funds," Xue Na, analyst at Nanhua Futures Co, said by phone from Hangzhou.
Holdings in ETPs fell for the 17th time in 18 days on Monday to the lowest level since 2009, data compiled by Bloomberg showed. The assets shrank by 70.3 metric tons last month, or 4.4 per cent, as rate-rise speculation increased.
Gold for December delivery fell as much as 1 per cent to US$1,093.30 an ounce on the Comex, and traded at US$1,099.20. Silver for immediate delivery dropped 0.2 per cent to US$15.22 an ounce. Platinum was 0.4 per cent lower at US$981.95 an ounce, while palladium fell 1 percent to US$604.50 an ounce.
China cuts yuan reference rate by record 1.9% as exports slump
China weakened the yuan's daily reference rate by a record 1.9 per cent, allowing depreciation to combat a slump in exports.
PHOTO: BLOOMBERG
[BEIJING] China weakened the yuan's daily reference rate by a record 1.9 per cent, allowing depreciation to combat a slump in exports.
The currency dropped an unprecedented 1.2 per cent to 6.2848 per dollar as of 9:43 am in Shanghai, and slid a similar amount in Hong Kong's offshore trading. The onshore spot rate was 0.9 per cent weaker than the reference rate of 6.2298, within the 2 per cent limit allowed by the People's Bank of China.
Monday's reference rate increase was a one-time adjustment, the PBOC said in a statement, adding that it will strengthen the market's role in the fixing and promote the convergence of the onshore and offshore rates. It said also that it will keep the yuan stable at a reasonable level. The yuan's effective exchange rate is stronger than that of other currencies, which is a deviation from market expectations, the central bank said.
The comments come after the PBOC said earlier Tuesday that a strong yuan puts pressure on exports. China's overseas shipments fell 8.3 per cent from a year earlier in dollar terms in July, well below the estimate for a 1.5 per cent decline in a Bloomberg survey.
The PBOC has kept the yuan broadly stable against the dollar since March and had been tightening its grip on the exchange rate as it encourages greater global usage in a push for official reserve status at the International Monetary Fund. The currency's closing levels in Shanghai were restricted to 6.2096 or 6.2097 versus the dollar for more than a week and daily moves were a maximum 0.01 per cent over the past month.
China's surprise cut in the reference rate triggered declines of more than 0.4 per cent in the Australian dollar, South Korea's won and the Singapore dollar, while Hong Kong's Hang Seng Index of shares rose 1.1 per cent and Taiwan's benchmark index gained 1 per cent.
South Korea not worried about won fall after China move: official
South Korea is not overly worried about any weakening in the won after China's currency devaluation as long as the won moves in an orderly manner, a South Korean foreign exchange official told Reuters on Tuesday.
PHOTO: BLOOMBERG
[SEOUL] South Korea is not overly worried about any weakening in the won after China's currency devaluation as long as the won moves in an orderly manner, a South Korean foreign exchange official told Reuters on Tuesday.
The official said the Chinese central bank's move earlier in the day was seen as aimed at better reflecting market conditions rather than one which could spark a so-called currency war, in which countries push their currencies lower to boost exports.
China let the yuan fall nearly 2 per cent to its lowest level in almost three years, and said it was a "one-off depreciation" based on a new way of managing the exchange rate, though economists said the time suggested it was also aimed at helping exporters.
The official, who declined to be identified, added that the US Federal Reserve's likely interest rate increase later this year would not cause major volatility in the foreign exchange markets because the Fed has signaled a raise for a very long time
.
Japan anxious at lull, US 'giving up', in pan-Pacific trade talks
[TOKYO] Japan has expressed concern about a loss of momentum in talks on a pan-Pacific trade pact after participants failed to agree to meet again this month to try to clinch a deal that would cover 40 per cent of the global economy.
Ministers from the 12 nations negotiating the Trans-Pacific Partnership (TPP), which would stretch from Japan to Chile, fell short of a deal at talks last month on the Hawaiian island of Maui, despite early optimism.
Japanese Economy Minister Akira Amari, in a blog circulated on Tuesday, also questioned why the United States appeared to have lacked its usual "stubborn persistence" at those talks, despite a willingness of some countries to stay to try to reach an agreement. "The reason I stressed ... that we should meet again this month was because each country might lose interest and (the talks) would go adrift," Mr Amari wrote.
"If they lose interest, it would take considerable time and effort to get motivation back to the original level, because the key to success is whether each country can maintain momentum towards an agreement." Mr Amari said that the United States was vague about a concrete time frame and it appeared its negotiators needed a break.
Mr Amari reiterated that a dispute over intellectual property protection for data used to develop biologic drugs, which Washington insists should be 12 years, and gaps over access to member countries' dairy markets - a key issue for New Zealand - were major sticking points.
"What every country thought was strange was that the United States did not show its usual stubborn persistence this time but simply gave up," he wrote, adding that the US negotiators seemed to have judged that agreement could not be reached in a day or two.
Failure to clinch a deal was a setback for US President Barack Obama's pivot to Asia and efforts to counter China's clout. Japanese Prime Minister Shinzo Abe has also cast the deal as crucial to his efforts to reboot Japan's stale economy.
Singdollar down 1.4% as yuan devaluation ripples across Asia, felling currencies and commodities
[HONG KONG] The yuan dropped the most in two decades, sparking a tumble in Asian currencies and commodities after China devalued its exchange rate to combat an economic slowdown.
The yuan dropped 1.9 per cent to 6.3270 per US dollar as of 1:25 p.m. in Hong Kong, after the central bank cut its reference rate by a record and said market forces will play a greater role.
It was the biggest one-day loss since China unified official and market exchange rates in 1994.
The Singapore dollar fell the most since 2011, trading down 1.4 per cent to 1.3995 to the US dollar at around 1:45pm.
The Bloomberg JPMorgan Asia Dollar Index sank to the lowest level since 2009, while a gauge of commodities lost 0.7 per cent. The Hang Seng China Enterprises Index advanced 1.3 per cent.
China's devaluation follows economic reports this month showing a plunge in exports, weaker-than-estimated manufacturing and slowing credit growth. Policy makers in the biggest emerging market are trying to balance calls for economic stimulus against long-term goals of increasing the role of markets and cutting back on debt-fueled investment.
"Policy makers and the central bank are still very concerned about the overall economic-growth momentum," said Qian Wang, Hong Kong-based senior economist for Asia Pacific at Vangaurd Group Inc. "China has suffered because of the strengthening of the currency."
The People's Bank of China cut its daily reference rate for the currency by a record 1.9 per cent. The change was a one-time adjustment, the central bank said in a statement, adding that it plans to keep the yuan stable at a "reasonable" level and will strengthen the market's role in determining the fixing.
The currency's closing levels in Shanghai were restricted to 6.2096 or 6.2097 versus the dollar for more than a week through Monday and daily moves have been a maximum 0.01 percent for a month.
The devaluation also triggered declines of at least 1 per cent in the currencies of Australia and South Korea. Criticism may be muted given the recent history of competitive devaluations globally, according to Bloomberg Economics analysts Tom Orlik and Fielding Chen.
The yuan slid 2.2 per cent in offshore trading in Hong Kong, trading at the weakest level since September 2012.
The MSCI Asia Pacific Index dropped 0.6 per cent, while futures on the Standard & Poor's 500 Index declined 0.4 per cent. The Shanghai Composite Index was little changed as airlines sank on concern a weaker yuan will increase the burden of their dollar-denominated debt and hurt earnings.
The Bloomberg Commodity Index lost 0.6 per cent after surging 2.4 per cent Monday. Gold for immediate delivery retreated 0.5 per cent to US$1,099.30 an ounce Tuesday, while silver, platinum and palladium also weakened. Copper, nickel, lead, tin and aluminum dropped at least 1 per cent in London."The depreciated yuan will reduce resources imports by China," said Ren Gang, Vice General Manager of private trading house Qingdao Youbangyuan Trading Co., in Shanghai.
"That's bearish news for global commodities, but could help China squeeze its capacity glut." The Bloomberg Dollar Spot Index, which tracks the greenback against 10 of its most-traded peers, advanced 0.5 per cent.
Greenspan issues warning to bond investors before Fed moves
Alan Greenspan has a warning for bond investors as the US central bank prepares to raise its benchmark interest rate from close to zero.
PHOTO: BLOOMBERG
[NEW YORK] Alan Greenspan has a warning for bond investors as the US central bank prepares to raise its benchmark interest rate from close to zero.
"We have a pending bond market bubble," the former Federal Reserve chairman said Monday in an interview on Bloomberg Television. "What ultimately will determine where it goes is to reach back and to ask ourselves where is the normal interest rate?" US 10-year note yields fell three basis points to 2.20 per cent as of 6:36 am in London, according to Bloomberg Bond Trader data. The price of the 2.125 per cent security due in May 2025 rose 9/32, or US$2.81 per US$1,000 face amount, to 99 3/8.
Yields have been anchored by the Fed's policy of keeping its main interest rate close to zero since 2008 to support the US economy.
Ten-year yields are about half their average over the past two decades and are within a percentage point of a record low set in 2012. They will climb to 2.82 per cent by the middle of next year, according to a Bloomberg survey of economists with the most recent forecasts given the heaviest weightings.
Speaking in an interview with Bloomberg "Surveillance" with Tom Keene, Greenspan also said low productivity was one of the major challenges facing the US and other advanced economies. Greenspan was Fed Chairman from 1987 to 2006 and is now a private adviser.
The Fed's benchmark, the target for overnight lending between banks, has averaged 2.73 per cent in the past 20 years.
There's a 48 per cent chance the Fed will raise borrowing costs at its Sept 16-17 meeting, based on the assumption that the benchmark rate will average 0.375 per cent following the increase, data compiled by Bloomberg show.
"When the Fed finally acts, we think rising rates will put pressure on bonds," Bob Doll, a senior portfolio manager at Nuveen investments Inc. in Chicago, wrote in a report Monday. "Investors need to be on the lookout for the possibility of a sharp rise in bond yields." Nuveen had US$233 billion in assets at the end of March, according to its website.
