China Unexpectedly Boosts Rates

[Chief V]

China Unexpectedly Boosts Rates

The guesswork and hearsay regarding what the Fed may (or may not) do to jumpstart the American economy has been the major catalyst in enhancing investor sentiment, thus drastically weakening off the opposed USD. On the other side of the coin, while a number of weeks separate today from the watershed FOMC event on November 3rd, one could take a contrarian view of the short-term trend and consider the recent moves against the Greenback as overcooked. Despite being back on its heels as the Asian session kicked off, the USD has finally been able to stage a modest comeback in the wake of a slew of market-moving headlines. As downbeat earnings info from both Apple and IBM set the stage for a weak showing in overnight stock markets, an unexpected rate hike from China tossed gasoline on a fire that was only in its infant stages. Raising both the benchmark lending rate and deposit rate 25 basis points, this latest move by the Peoples Bank of China follows their previous actions of incremental enlargements in capital reserve requirements. Aimed to reel-in liquidity in a seemingly stabilizing economy, China’s latest interest rate play is a response to unwanted inflation expected to jump to a two-year high with September’s CPI reading potentially hitting 3.9% y/y. With the fastest growing economy once again looking to curb unnecessary growth, commodities and their corresponding currencies have taken the brunt of the load this morning as both gold and crude oil have dropped about 2.50% respectively.

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[Butifldrm]

Thanks for the post Chief, and the hope for stabilization of the dollar.