Item 1 of 2 Chinese Yuan banknotes are seen in this illustration picture taken June 14, 2022. REUTERS/Florence Lo/Illustration/File Photo
March 26 (Reuters) – A look at the day ahead in Asian markets.
Chinese markets will be under close scrutiny on Tuesday, as signs emerge that the recovery for much of this year in asset prices and investor sentiment may be fading as the first quarter draws to a close.
The broader tone across Asia is fairly muted too with regional stocks on the defensive as investors grapple with a resilient dollar and higher U.S. bond yields in the wake of last week’s central bank fireworks.
Tuesday’s calendar is relatively light. The latest reading of Japan’s service sector producer price inflation is potentially the most significant release, while Australian consumer sentiment is also on tap.
The People’s Bank of China set the yuan fixing rate at 7.0996 per dollar, some 1,300 basis points lower than the market’s neutral estimate of 7.23. Analysts at Deutsche Bank said this marked the largest strengthening bias since November.
According to analysts at Rabobank, this suggests Beijing does not want the yuan to weaken excessively ahead of the U.S. presidential election in November.
Whatever the reasoning, it was a dramatic reversal from Friday, when the offshore yuan slumped 0.75% against the dollar for its biggest fall in over a year.
That was on huge volume too – spot volume on trading platform EBS was $24.2 billion, the fourth highest ever, according to CME Group, which owns EBS.
There doesn’t appear to be any clear explanation for the yuan’s swings, so it’s no surprise that the volatility and uncertainty is spilling over into other assets – blue chip stocks fell for a third day on Monday, the longest losing streak since January.
Washington and London accused the hacking group nicknamed “APT31” of being an arm of China’s Ministry of State Security and reeled off a laundry list of targets: White House staffers, U.S. senators, British parliamentarians, and government officials around the world who criticized Beijing.
Here are key developments that could provide more direction to markets on Tuesday:
– Japan services PPI (February)
– Australia consumer sentiment (March)
– Hong Kong trade (February)
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