Yuan Drops on China Rule Change; Dollar Edges Up: Markets Wrap
The offshore yuan fell after Chinese policymakers curtailed their strength by making it easier to bet against. Stocks started the week mixed.
The yuan fell 0.7% against the dollar, up against large competitors. The Australian dollar also slipped. S&P 500 futures fell after the benchmark ended higher last week, and some traders betting that lawmakers are nearing a stimulus deal. Stocks fell in Japan, changed little in Australia, and rose in Hong Kong and South Korea. Crude oil declined and gold was stable. Government bonds will not trade on Monday due to the US holiday.
China set its daily currency fixing on Monday weaker than expected after the central bank removed rules that made it expensive to bet against the yuan. Financial institutions no longer need to set aside cash when buying foreign currency for customers through currency futures.
"We still see scope for further appreciation of the yuan, especially given China's strong growth momentum, the large yield differential and the strong inflows that are partly due to the inclusion of the index," said Khoon Goh, head of Asia research at Australia & Asia. New Zealand Banking Group in Singapore. "But the authorities want to encourage more reciprocal flows, and the removal of reserve requirements will help."
Meanwhile, the US stimulus saga continues, with President Donald Trump and House Speaker Nancy Pelosi accusing each other of no progress on a deal. According to a Washington Post / ABC News poll published on Sunday, Trump is 12 points behind Joe Biden a little more than three weeks before election day in a national poll of likely voters.
"Markets that once feared a democratic turn now appear to be hopeful that the Democrats will take control of the Senate, with the election results for Biden increasing optimism for bigger momentum," said Ben Emons, executive director of global macro strategy at Medley Global Advisors .
Trump has been cleared by his doctor and is no longer considered a risk for coronavirus transmission to others as he meets the criteria to end self-isolation, his doctor Sean Conley said. The virus continued its relentless spread in Europe, with France setting another daily record of infections and Germany reporting the most Covid-related deaths since May.
Here are some key events:
Monday is Columbus Day in the USA. Prime Minister Boris Johnson set a deadline on Thursday to work out the outline of an EU trade deal. JP Morgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc., and Johnson & Johnson earnings are due this week. IMF / World Bank The meetings will continue.
These are the main movements in the markets:
S&P 500 futures fell 0.1% from 10:25 a.m. in Tokyo. The meter rose 0.9% on Friday. Japan's Topix fell 0.3%. Hong Kong's Hang Seng Index rose 0.4%. Shanghai Composite gained 0.5%. South Korea's Kospi gained 0.2%. Australia's S & P / ASX 200 index fell 0.1%. Little changes have been made to the Euro Stoxx 50 futures.
The offshore yuan fell 0.7% to 6.7343 per dollar. The Bloomberg Dollar Spot Index rose 0.1%. The yen remained stable at 105.61 per dollar. The euro bought $ 1.1820, down 0.1%. The Aussie fell 0.4% to 72.14 US cents.
The 10-year government bond yield ended last week at 0.77%. Australia's 10-year yield remained at 0.85% on Monday.
West Texas Intermediate Crude Oil fell 1% to $ 40.20 a barrel. Gold was barely changed at $ 1,929.59 an ounce.
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