China front loading rates

China’s monetary tightening in 2011 may be mainly in the first half as officials tackle the fastest inflation in more than two years, JPMorgan Chase & Co. and Morgan Stanley said.

The People’s Bank of China increased key one-year lending and deposit rates by 25 basis points on Christmas Day in its second move since mid-October. The change took effect yesterday. China’s stocks rose today and yuan forwards climbed to the highest level in five weeks as the decision bolstered speculation inflation will be contained.

Premier Wen Jiabao’s government aims to limit asset bubbles in the real-estate market and prevent rising prices from leading to social unrest after flooding the economy with cash from late 2008 to drive a recovery. Officials may keep raising interest rates and banks’ reserve requirements, sell bills to soak up cash and allow more gains by the yuan against the dollar, according to JPMorgan.

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell