Week in FX Asia – Not All Dull And Boring In China

Now that Washington politicking has been suspended for a few more months at least, the market and investors can knuckle down and concentrate on the rest of the world as well. However, before totally committing themselves there is the “small” matter of getting through some backdated US economic reports starting with next Tuesday’s US non-farm payrolls. So far the market has been pricing out fiscal concerns and pricing in their expectations for US monetary policy. With Fed tapering being pushed further out the dollar has suffered and closing out the week just shy of yearly lows against the majors.

The US’s credibility overseas will certainly be put to the test. The never was any real fear that the country’s reputation of being the primary issuer or reserve currency of choice would be called into question, despite China inquiring about the ‘dollars’ attributes. China’s Dagong rating agency has added more woes to the “mighty” dollar when it cut the US sovereign rating to A- yesterday.

Providing some market encouragement is stronger data out of China. Its economy grew +7.8%, y/y, in Q3 of 2013, in line with the median forecast and accelerating from +7.5% in Q2. Even September’s industrial production (IP) was healthy, rising +10.2%, y/y, in line with market expectations. The disappointments came with retail sales and fixed-asset investments, both a tad weaker. The street now expects consecutive quarter growth to soften somewhat going forward following the strong summer activity.

The results suggest that the Chinese economy remains on target to meet the government’s annual growth target of +7.5%, and ease the concerns about a “hard landing.” Everyone is watching for progress in Beijing’s efforts to rebalance the economy and to make “consumption a bigger influencing variable for growth.” The Chinese Yuan ends the week setting a record high (6.0989) for the fifth consecutive session. Beijing has intervened aggressively lately to blunt a rise in the Yuan’s value. The PBoC continues to proceed with caution in liberalizing its forex exchange policy. Communist leaders are due to hold a key policy meeting next month and market will be interested in their take away of US fiscal fiasco.

• China and Japan Prepare Contigency Plans for Next US Fiscal Debate –
• Asian Currencies Advance Again –
• China’s got a Debt Problem –
• China’s Growth takes Pressure of Leaders –
• China Growth Rebounds –
• China’s GDP at 7.8% –
• Japan Economy On Track According to Reuters Poll –
• Bank of Japan To Extend Special Loans to Nudge Banks to Lend –
• China Issues Harsh Assessment of US Debt Deal –
• China Set to Impress With Strong Growth Oct 18 –
• Shinzo Abe Pledges National Interest Protection After TPP Tariff Elimination
• China may re-think U.S. Treasury Holdings –
• China Money Rate Drops to Three-Month Low –
• China’s Foreign Reserves Surge –
• China Looking to Europe for Reserves –
• Yuan Reform Evident in Chinese Central Bank Allowing Record Highs –
• China Publishes New Plan To Deal With Overcapacity –
• Reserve Bank of Australia Leaves Cut Option on the Table –
• China’s FX Reserves enjoy Biggest Jump Since 2011 –
• Nomura Warns Asia Still At Risk From QE –

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