PBOC Rate Hike
Dateline 10/28/04: The (PBOC) People's Bank Of China raised interest rates for the 1st time in more than 9 years.
The benchmark 1 year lending rate was hiked by 0.27% from 5.31% to 5.58%, the first increase since July 1995.
The benchmark 1 year deposit rate was raised by the same magnitude from 1.98% to 2.25%, the first increase since July 1993.
Dateline 04/27/06: PBOC raises 27 basis points from 5.58 to 5.85%
Dateline 08/18/06: PBOC raises 27 basis points from 5.85 to 6.12
Dateline 03/16/07: PBOC raises 27 basis points from 6.12 to 6.39
Yesterday: BOJ held interest rates at 0.50% as quarterly GDP came in lower than expected +2.4% vs +2.7%.
"And the carry trade continues unabated, but traders should be wary of a BOC raise on the yuan..."
Dateline 05/17/07: the Chinese central bank (PBOC) said it was widening the yuan's trading band to plus or minus 0.5% per day against the U.S. dollar, as opposed to plus or minus 0.3% per day previously.
The PBOC also lifted the bank reserve requirement ratio by (+50 basis points) or 0.50 of a % point and...
increased its benchmark 1 year lending rate by (+18 bps) or 0.18 of a % point, from 6.39 to to 6.57%, and the 1 year deposit rate by (+27 bps) or 0.27 of a % point, to 3.06%.
The PBOC raise is negative for commodities currencies and in turn for global risk appetite. China's Shanghai index is up 51% YTD after a 130% gain in 2006.
After the Bank of Japan (BOJ) raised +25bps around Feb 24th, forcing the yen up, the Shaghai index fell 9% on Feb 27, which triggered a 3 week global equity sell off.
Today, Japan's Yen, which acts as a proxy for the Chinese Yuan or RMB, rose against the dollar after the announcement as the dollar fell 0.3% to stand at 120.91 yen.
To exemplify the potential global forex unwind, the Yens move vs the Australian dollar was even stronger, rising 0.5%.
Should the Yen continue to rise, the proxy Yen carry trade "haircut" for leveraged players could precipitate an unwind of positions.
Perhaps showing visible signs early next week on MON or as late as WEN.
The benchmark 1 year lending rate was hiked by 0.27% from 5.31% to 5.58%, the first increase since July 1995.
The benchmark 1 year deposit rate was raised by the same magnitude from 1.98% to 2.25%, the first increase since July 1993.
Dateline 04/27/06: PBOC raises 27 basis points from 5.58 to 5.85%
Dateline 08/18/06: PBOC raises 27 basis points from 5.85 to 6.12
Dateline 03/16/07: PBOC raises 27 basis points from 6.12 to 6.39
Yesterday: BOJ held interest rates at 0.50% as quarterly GDP came in lower than expected +2.4% vs +2.7%.
"And the carry trade continues unabated, but traders should be wary of a BOC raise on the yuan..."
Dateline 05/17/07: the Chinese central bank (PBOC) said it was widening the yuan's trading band to plus or minus 0.5% per day against the U.S. dollar, as opposed to plus or minus 0.3% per day previously.
The PBOC also lifted the bank reserve requirement ratio by (+50 basis points) or 0.50 of a % point and...
increased its benchmark 1 year lending rate by (+18 bps) or 0.18 of a % point, from 6.39 to to 6.57%, and the 1 year deposit rate by (+27 bps) or 0.27 of a % point, to 3.06%.
The PBOC raise is negative for commodities currencies and in turn for global risk appetite. China's Shanghai index is up 51% YTD after a 130% gain in 2006.
After the Bank of Japan (BOJ) raised +25bps around Feb 24th, forcing the yen up, the Shaghai index fell 9% on Feb 27, which triggered a 3 week global equity sell off.
Today, Japan's Yen, which acts as a proxy for the Chinese Yuan or RMB, rose against the dollar after the announcement as the dollar fell 0.3% to stand at 120.91 yen.
To exemplify the potential global forex unwind, the Yens move vs the Australian dollar was even stronger, rising 0.5%.
Should the Yen continue to rise, the proxy Yen carry trade "haircut" for leveraged players could precipitate an unwind of positions.
Perhaps showing visible signs early next week on MON or as late as WEN.
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