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Attention turning to China from Japan - DBS

FXStreet (Barcelona) - The DBS Research Team notes that attention is turning towards China from Japan as the recent surprise rate-cut by China shows that it is keen to develop its financial markets through reforms.

Key Quotes

“In Asia, attention is turning to China from Japan, and rightly so. China’s deci¬sion to cut interest rates surprised markets last Friday."

"We do not subscribe to concerns that China might be joining Japan and the Eurozone in weakening its exchange rate via easier monetary policy. For a start, the official parity rate for USD/CNY was lowered to 6.1387 from 6.1417 earlier Friday morning."

“It was important that the 1Y lending rate was reduced by 40bps to 5.60% while the deposit rate was lowered by a smaller 25bps to 2.75%. Essentially, China is signaling that it is ready to support growth by narrowing its saving-investment gap and by advancing reforms to develop its financial market.”

“Despite European Central Bank (ECB) President Mario Draghi’s dovish comments hammering EUR/USD below 1.25 last Friday, the USD did not extend its ascent against Asia ex Japan currencies. For example, USD/SGD and USD/MYR are trad¬ing below their psychological levels at 1.30 and 3.35 respectively this morning.”

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