June 25, 2018
Indicative Interbank spot sell rates only as of 9:00 AM PST.
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USD/CNY 6.5360 (onshore)
United States (US): Trade War, New Home Sales
President Trump issued new threats against America’s trade partners, calling on all the countries to remove trade barriers and tariffs, raising concerns about potential escalation of trade war between U.S. and the rest of the world. Trump also plans to bar many Chinese companies from investing U.S. technology. He’s also looking to block companies with at least 25% Chinese ownership from buying companies involved “industrially significant technology” and to prevent U.S. companies from selling “industrially significant technology” to China.
New home sales surged 6.7% in May, as sales in the South rebounded 17.9%, highest in 11 years. High mortgage rates do not appear to be dampening demand. The 30-year fixed mortgage rate averaged 4.57% last week.
Euro traded at 1.1708 against USD at 12:15 pm PST.
German: Business Climate
Germany’s business confidence weakened amid escalating trade war. Business climate index dropped to 101.8 in June from 102.3. Companies were less satisfied with their current business situation.
Japan: Summary of Opinions
Japanese Yen traded at 109.47 per USD at 12:15 pm PST.
BoJ released its Summary of Opinions stating the bank should persistently continue with powerful monetary easing as there’s still a long way to achieve the inflation target of 2%. Core CPI has only rose 0.7% YoY in May. The board voted 8-1 to hold its target of raising the amount of outstanding JGB holdings at an annual pace of about JPY 80 trillion. The bank will also purchase government bonds so that the yield of 10-year JGBs will remain at around 0%.
China: Trade War
Onshore Chinese yuan traded at 6.5360 per USD at 12:15 pm PST and offshore Chinese yuan traded at 6.5469 per USD.
CNY dropped over 0.50% to its lowest level of 2018, as PBoC announced on Sunday that it will cut the required reserve ratio for some banks by 0.5% on July 5th, amid trade war. PBoC decision will unlock about CNY 700 billion (USD 108 billion) of liquidity, to accelerate the pace of debt-for-equity swaps and spur lending to smaller companies. The cut will release about CNY 500 billion for the China’s five large state banks and 12 national joint-stock commercial banks. PBoC will continue to implement a stable and neutral monetary policy to create a suitable monetary and financial environment for high-quality development and supply-side structural reforms.
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.