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PBoC rate cut looming?

FXStreet (Bali) - There is a potentially bullish development for the Australian Dollar getting some air time along Asian trading desks, with Bloomberg carrying a story noting that the swap market is signaling the first PBoC rate cut since 2012.

As Bloomberg reports: "The cost of locking in Chinese borrowing costs is poised to drop below the central bank’s savings benchmark for the first time since 2012 as speculation mounts that interest rates will be cut. The one-year swap, a fixed payment to receive the floating seven-day repurchase rate, has fallen 2.13 percentage points so far in 2014 and ended yesterday at 3.09 percent, near the official 12-month deposit rate of 3 percent. The last time the contracts were lower than the benchmark was in 2012, when the People’s Bank of China reduced savings and loan costs twice."

Market sources believe that the possibility of the PBoC pulling the trigger and cutting rates is fairly high, as the Central Bank faces a toxic cocktail of modest growth and lower prices.

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