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Some color out of Asia

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The FX traders’ attention shifted to China at early trading hours. The soft consumer and producer price inflation and slowdown in Chinese exports (from 15.3% to 11.6%) revived speculations for additional monetary stimulus in the coming months. The PPI y/y hit a 32-month low of -2.2%, confirming that despite direct liquidity injections and repo rate cuts in September and October, China is running below its full capacity. In this respect, the macro fundamentals in China hint at further PBoC easing. Although the PBoC refrains from a global rate cut, dovish PBoC actions should intensify in Q4.

In addition to market supportive PBoC expectations, news that Shanghai – Hong Kong connect program will be effective from November 17th and allow a net 23.5 billion Yuan cross-border purchases boosted inflows into Chinese stock markets. The PBoC raised Yuan daily reference rate to 6.1377 per dollar, the strongest since March to avoid further CNY appreciation.

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