PBOC adviser sees yuan rising 3 pct vs dlr in 2010

June 25, 2010 By Leave a Comment

June 24 (Reuters) – The yuan is likely to rise about 3 percent against the dollar by the end of this year, assuming the euro stays around current levels against the U.S. dollar, Li Daokui, a central bank adviser, said on Thursday.

Li, one of three academic members of the People’s Bank of China monetary policy advisory committee, said the reform of the exchange rate regime announced at the weekend would help tame inflation.

But, in an interview with Reuters, Li said depegging of the yuan would have a limited impact on China’s interest rate decision-making.

Li, an economics professor at Tsinghua University in Beijing, also said freeing up the yuan was unlikely to trigger big inflows or outflows of capital.

The PBOC said on Saturday that it would once again let the yuan move more freely after having kept the currency more or less pegged to the dollar for two years to provide stability for exporters during the global downturn.

The yuan CNY=CFXS drifted slightly lower on Thursday to around 6.8141 per dollar, representing a rise of about 0.2 percent since the long-awaited policy shift. [CNY/] (Reporting by Chen Min and Alan Wheatley; Editing by Chris Lewis)

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Grains Week Ahead-Yuan move welcome, but all eyes on weather

June 21, 2010 By Leave a Comment

CHICAGO, June 20 (Reuters) – China’s surprising move over the weekend signaling a new willingness to let its currency gain strength may give grain prices an initial boost this week, but recent adverse weather for world crops will be more important.

“I, and a few other commercials, see the news as mildly supportive. More important may be how the external commodity markets react to the news,” said Dan Basse, president of grain and livestock industry consultant AgResource in Chicago.

“Chinese and U.S. weather is much more important to grain price direction in the week ahead,” he said.

In what was seen as a largely political move to deflect criticism of its fixed exchange rate ahead of the G20 meeting this week, China’s central bank on Saturday indicated it was ready to break a hard peg with the dollar that has come under intense criticism from the United States and other countries.

“This sounds more serious than previous rhetoric coming out of Beijing, but it would be wise to initially take the news with a grain of salt,” said Bill Lapp, an economist with Advanced Economic Solutions in Omaha, Nebraska.

“The exchange rate flexibility is presumably an effort to tame inflation, which we have already observed in their recent purchases of US corn. In other words, a stronger yuan benefits U.S. ag exports. But we have already seen some benefit.

“Not sure what this does for prices Sunday night, but would think weather is still the first factor to watch,” Lapp said.

Chicago Board of Trade wheat and corn futures rallied to three-week highs on Friday and soybeans traded around a one-month peak because of the turn to adverse crop weather.

So analysts say there could be follow-through strength in the markets this week if harsh weather patterns persist.

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TREASURIES-Little changed in Asia, inflation data eyed

June 17, 2010 By Leave a Comment

June 16 (Reuters) – U.S. Treasuries were steady in Asia on Wednesday a day after the U.S. Standard & Poor’s 500 Index .SPX turned positive for the year, prompting investors to trim their holdings of safe-haven government debt.

Bonds

* Activity remained subdued in Asia as financial markets in China, Hong Kong and Taiwan were closed for national holidays.

* Investor fears over the potential for contagion from the euro zone debt crisis have eased slightly, cutting appetite for Treasuries, after Tuesday’s sovereign debt auctions in Spain, Belgium and Ireland attracted healthy demand.

* But even so, few are convinced that a sharp bond rally in the past two months on the back of the European sovereign crisis has run its course, market participants said. During the rally, the benchmark 10-year yield plunged to a one-year low of 3.06 percent from this year’s peak at a little above 4.00 percent hit in early April, according to Reuters data.

* “The biggest reason people do not expect Treasury yields to jump is that the market continues to believe the Federal Reserve won’t hike rates for some time,” said a portfolio manager at an investment management firm, adding that tame inflation is supporting such market views.

* Data on May producer prices at 1230 GMT and Thursday’s May consumer price numbers are both expected to slip, likely helping expectations the Fed will keep its key policy rates near zero for a while.

* Investors will also look for clues on the health of the economy in May housing start figures at 1230 GMT and May industrial output at 1315 GMT.

* Benchmark 10-year notes US10YT=RR inched up 1.5/32 in price to yield 3.303 percent, barely moved from late U.S. trade on Tuesday.

* T-notes futures TYv1 were up 1/32 at 119-29.5/32.

* Two-year yields were little changed at 0.758 percent US2YT=RR, while 30-year notes rose 3/32 in price to yield 4.215 percent US30YT=RR, down about 0.5 basis point from late U.S. trade. (Reporting by Rika Otsuka; Editing by Joseph Radford)

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Food Inflation Eases To 18.65%

December 25, 2009 By Leave a Comment

Food Inflation Eases To 18.65%

NEW DELHI: After seven weeks of steady rise, annual inflation in food articles eased marginally to 18.65% for the week ended December 12, from 19.95% for the previous week, following a drop in prices of cereals and fruit and vegetables as more supplies reached the market.

Prices of food articles declined 1.2% during the course of the week. The government’s decision to release wheat in the open market is also expected to have an impact on the prices soon.

Chetan Ahya of Morgan Stanley pointed out in a research note that food inflation will moderate to about 15% over the next three months. “Strong growth in winter crop output, which is due for harvesting in March-April, should also help to some extent,” Ahya said.

Further, strengthening in rupee on account of strong capital inflows into the second-fastest growing major economy in the world is also expected to keep a check on inflation.

“Economics literature shows that a 10% appreciation in rupee will help in cutting wholesale price inflation any where between 1% to 3%,” said Indranil Pan, chief economist at Kotak Mahindra Bank.

Indian rupee has appreciated by more than 4.3% in this fiscal, the third highest appreciation among Asian currencies according to data compiled by Bloomberg.

According to Mr Pan, although the central bank may not use rupee appreciation as a way to tame inflation, it will have a softening effect on inflation in the short term.

The annual wholesale price inflation rose to 4.78% in November from 1.34% in the month before.

Finance minister Pranab Mukherjee and Planning Commission deputy chairman Montek Singh were among top policymakers who expressed their concern on rising food price inflation on Wednesday.

The index for non-food articles rose 2.4% during the week. This group includes primary commodities that go into manufacture of other products. The inflation in this category is now 7.97%, steadily going up over the last couple of months. The increase in prices of these commodities could suggest a stronger demand from the manufacturing sector.

-The Economic Times.

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