October, 28 2016 by lsr team

The PBoC’s trade-weighted RMB basket has weakened by a little over 8% since its launch last December. The drop has been orderly, in line with Beijing’s intentions. However, the low-hanging fruit from RMB depreciation has already been picked. Despite successively weaker CNY fixings against the dollar, the RMB basket has failed to decline since late August and this month it has been creeping higher. What is causing this divergence? Is it sustainable, and what does it mean for Beijing’s policy choices?

September, 23 2016 by lsr team

The RBA’s shift to a neutral bias at its meeting in September, following 50bps of rate cuts in 2016, did not come as a surprise. Perhaps more interesting was the discussion of the most recent collateral damage in the global monetary policy race to the bottom. Officials took note of the distortive impact of the BoJ’s policies on Australia’s repo market, manifested in rising repo rate spreads relative to the RBA’s cash rate. In turn, persistently high repo rates put upward pressure on Australian banks’ funding cost base, further strengthening the...

April, 20 2016 by lsr team

The EM asset rally has been underpinned by a dovish Fed, receding fears of US recession and tentative evidence of macro stabilisation in China following a shift to pro-growth policies in Beijing. What has received less attention is the role played by recent yen appreciation, from both fundamental and risk angles. The onset of Abenomics weakened JPY/USD by some 40% in the space of three years. The yen bottomed in June, received a boost in the wake of August’s CNY step devaluation and embarked on a relatively steep appreciation path in December 2015 as global risk av...