Intraday Market Thoughts

Archived IMT (2011.03.18)

by Ashraf Laidi
Mar 18, 2011 12:06

Regular Readers and Followers on Twitter were warned of a potential China tightening action at 7:24 am GMT (nearly 3 hours before it materialized) See here http://twitpic.com/4amuxf when most pundits were mulling the details of the yen intervention. The PBOC raised its reserve requirement ratio by 50-bps to 20% as part of its gradualist approach to reining in lending and combating inflation. My rationale for the PBOC prediction was based on the following: China benefits from a rising yen due to its prolonged purchases of Japanese Govt Bonds. Recall that the PBOC made its first interest rate hike since 2007 (not RRR) on Oct 19, less than one month after Japan made its first intervention since 2004. Any rate hike would upset risk appetite and dampen the G7 efforts to weaken yen. After all, China is not a member of the G7. SEE PRIOR IMTs for more detail . Meanwhile, EURUSD finally breached my 1.4120 target (See prev IMTs), I expect 1.4180s as the next key barrier.

http://twitpic.com/4amuxf

 
 

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