The US dollar is softer against most of the major currencies and mixed against the emerging market currencies. European currencies firmer, with the continued recovery of the Swedish krona on the back of a more hawkish central bank, and the euro poking through $1.17 for the first time in over a week with the help of strong factory orders report from Germany. Central and East European currencies are leading among emerging markets. Asian equities continued to move south while European bourses are moving higher. Benchmark bond yields are mostly 2-4 bp higher.
The PBoC set the yuan’s reference level 0.62% higher, which is the most since last October, but the yuan gave back those gains to trade little changed on the day. On July 3, the dollar reached CNY6.72. Yesterday it reached a low near CNY6.60. Today’s range was roughly CNY6.6490 to CNY6.6260. The loss of the yuan’s downside momentum has failed to support the equity market. Note that the cut in the required reserve ratio, announced in late June, came into effect today. The 0.9% loss in Shanghai Composite is the third loss in the past four sessions and brings the index to a fresh two-year low. Barring a 4% rally tomorrow, the Shanghai Composite drop will extend for the seventh week.
More broadly, the MSCI Asia Pacific Index fell for a fourth consecutive session and the eighth session in the past nine. It rose one week in each of the past two months. It is approaching the 160 level, which was an area of consolidation in Q3 17. Nearly all the markets in the region were lower today, except Australia, India, and Singapore.
In contrast, European bourses are higher. The Dow Jones Stoxx 600 is up a little more than 0.5% in late morning turnover in Europe,