FOREX NEWS & BLOG

Print this out an stick it on your fridge!

From our glossary;

• The ‘blackout’ policy from the Federal Reserve limits the extent to which Federal Open Market Committee participants and staff can speak publicly or grant interviews. The period begins the two Saturdays preceding a Federal Open Market Committee (FOMC) meeting.

This article was written by Eamonn Sheridan at www.forexlive.com.

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The People’s Bank of China (PBOC), China’s central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a “band,” around a central reference rate, or “midpoint.” It’s currently at +/- 2%.

How the process works:

• Daily midpoint setting: Each morning, the PBOC sets a midpoint for the yuan against a basket of currencies, primarily the US dollar. The central bank takes into account factors such as market supply and demand, economic indicators, and international currency market fluctuations. The midpoint serves as a reference point for that day’s trading.
• The trading band: The PBOC allows the yuan to move within a specified range around the midpoint. The trading band is set at +/- 2%, meaning the yuan could appreciate or depreciate by a maximum of 2% from the midpoint during a single trading day. This range is subject to change by the PBOC based on economic conditions and policy objectives.
• Intervention: If the yuan’s value approaches the limit of the trading band or experiences excessive volatility, the PBOC may intervene in the foreign exchange market by buying or selling the yuan to stabilize its value. This helps maintain a controlled and gradual adjustment of the currency’s value.

The previous close was 7.3249

PBOC injects 123bn yuan via 7-day RR, sets rate at 1.5%

• 25bn yuan mature today
• net injection is 98bn yuan

Earlier:

• PBOC sets one and five year loan prime rates unchanged

This article was written by Eamonn Sheridan at www.forexlive.com.

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Market expectations are high for a Bank of Japan rate hike at their January 23 and 24 meeting this week.

Check out this graph from Reuters on inflation sitting above target since late 2022:

The hurdle to a rate hike this week is any unexpected market volatility following Trump’s swearing in later today, January 20.

The BoJ is watching market response to any immediate policy moves from Trump. The hints we have had just today are moves on immigration and oil:

• Trump to issue executive orders on immigration, energy, government hiring policies soon
• Leaks around Trump’s ‘day one’ executive orders have not mentioned tariffs at all
• Trump spoke at a rally – hinted at action on immigration and energy (nothing on tariffs)

This article was written by Eamonn Sheridan at www.forexlive.com.

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People’s Bank of China Loan Prime Rate (LPR) setting.

1-year set at 3.1%

• expected 3.1% and prior 3.1%

5-year set at 3.6%

• expected 3.6%, prior 3.6%

***

As I posted earlier:

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. The one-year LPR and the over-five-year LPR are currently at 3.10% and 3.60%, respectively.

Recent moves:

• July 22, 2024: The one-year LPR was reduced by 10 basis points to 3.35%, and the over-five-year LPR was lowered by 10 basis points to 3.85%.

• In August and September 2024, the People’s Bank of China (PBOC) maintained the Loan Prime Rates (LPR) at the levels set in July.

• October 21, 2024: The one-year LPR was further reduced by 25 basis points to 3.10%, and the over-five-year LPR was decreased by 25 basis points to 3.60%.

• November 20, 2024: Both the one-year LPR and the over-five-year LPR were maintained at 3.10% and 3.60%, respectively.

• December 20, 2024: The PBOC kept both the one-year LPR and the over-five-year LPR unchanged.

This article was written by Eamonn Sheridan at www.forexlive.com.

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