Yuan dips after China cuts rates; Swedish crown, Aussie slide
Reuters
Published Jun 20, 2023 04:39
Updated Jun 20, 2023 07:09
By Samuel Indyk and Rae Wee
London (Reuters) - The yuan slipped towards a seven-month low on Tuesday after China cut interest rates, while the Swedish crown weakened to its lowest level since 2009 against the euro on persistent concerns about the real estate sector.
China lowered its one-year and five-year loan prime rates (LPR) by 10 basis points, the first such easing in 10 months as authorities seek to shore up a slowing economic recovery.
The decision knocked the yuan lower, with the onshore yuan finishing the domestic session at 7.1744 per dollar, the weakest such close since Nov. 28.
The offshore yuan was last 0.2% lower at 7.1827 per dollar, languishing near last week's trough of 7.1916.
"Chinese authorities are concerned about weak growth but are wary about re-inflating the property bubble, so expectations of large stimulus to the property sector might not be met," said ING global head of markets Chris Turner.
"The market is moving towards the view that fiscal stimulus might be lukewarm and that's one of the reasons why the renminbi is staying soft."
Elsewhere, Sweden's crown dropped 0.4% to its lowest level since 2009 at 11.762 per euro. It was last at 11.759 per euro, in close proximity to 2009's record low of 11.8.
Concerns about the property sector have been weighing on the currency and an expected rate hike from the Riksbank next week could add to worries for investors as property makes up 80% of household debt.
"The cross (euro-swedish crown) continues its sharp rally, which is only partially related to data, normal drivers and bad news for the real estate sector," said Danske Bank FX analyst Kirstine Kundby-Nielsen.
"Risk off markets, periods of low liquidity and mere momentum trading have added to SEK weakness," Kundby-Nielsen added.
RATES OUTLOOK
Elsewhere, the Australian dollar tumbled over 0.8% to a session low of $0.6784 after minutes from the Reserve Bank of Australia's (RBA) latest policy meeting showed the RBA's decision to raise interest rates in June was "finely balanced".
"The debate illustrated to the market that at the next meeting in July the decision to leave rates on hold might be taken," said Commerzbank (ETR:CBKG) FX analyst You-Na Park-Heger.
"The risk of an inflation surprise does of course exist and as a result a rate hike in July is not off the agenda yet. Against this background downside pressure on AUD is therefore likely to be limited for now."
The euro rose 0.1% to $1.0931, supported by a still-hawkish European Central Bank after two policymakers on Monday said the bank should err on the side of further rate increases as the inflation rate could come in even higher than the ECB expects.
Sterling slipped 0.2% to $1.2799, ahead of British inflation data on Wednesday and the Bank of England's (BoE) interest rate decision on Thursday.
Get The App
Markets are expecting the BoE to deliver a quarter-point rate increase, followed by almost another 125 bps of tightening to the end of the cycle.
"Until they have confidence that the inflation is coming down the BoE might not want to push back against market expectations for interest rate hikes," ING's Turner said.
"If that's the case then sterling probably holds onto its recent gains."
The U.S. dollar rose to a seven-month peak of 142.26 yen although it was last 0.4% lower at 141.45.
The Bank of Japan maintained its ultra-easy monetary policy on Friday and the yen has come under renewed pressure amid rising interest rate differentials between Japan and other developed markets.
The U.S. dollar index, which measures the currency against a basket of six others, was little changed at 102.42.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.