Risk aversion dominates the Asian markets again and renewed selling is seen in stocks. China market halted trading after hitting the 7% circuit breaker for the second time this week. At the time of writing, Nikkei is trading down -1.8% while HK HSI is down -2.7%. Crude oil was sold off sharply overnight and extend losses with WTI hitting lowest level in more than a decade, trading at 33.2. Gold, on the other hand, is supported by safe haven flow and the lack of clear strength in dollar and breaches 1100 handle. In the currency markets, yen remains the strongest major currency this week while commodity currencies are broadly lower. While dollar remains the second strongest for the week, it's paring some gains against European majors.
China's central bank PBoC set the yuan midpoint rate to 6.5646 per dollar today, -0.5% lower than the prior fix of 6.5314. That's the largest decline is daily fixings since August. And that eight straight day of decline. Meanwhile, offshore yuan dropped to a new low since trading started back in 2010. The development raised concern that depreciation of yuan may accelerate ahead. And, the slowdown in the Chinese economy could be even worse than expected.
Aussie is so far the weakest major currency this week, overwhelming Canadian dollar. Trade deficit narrowed to AUD -2.91B in November versus expectation of AUD -2.98B. But some economists noted that the upside surprise was mainly due to a spike in rural goods which won't last. Meanwhile, building approvals dropped sharply by -12.7T mom in November.
In US, Fed vice chairman Stanley Fischer said that four rate hike in 2016 was "in the ball park". He noted that regarding China, "there are levels of uncertainty and they've risen a bit now." But he talked down the impact and said that "the rest of the world matters to us. If it was only China it would still matter, but a good deal less." Fed also released minutes of December meeting but provided little new information. For more on FOMC minutes:
- FOMC Minutes Analysis: NOW We Get The 'Dovish Hike'
- Minutes from the Landmark December Meeting Paint a Picture of Broadening Consensus
- FOMC Minutes: Not All Members are as Confident as Yellen Despite the Unanimous Hike
- US December FOMC Minutes Provide Little Information on Timing and Pace of Future Hikes
Looking ahead, Eurozone will release retail sales, retail PMI, confidence indicates and unemployment. US will release jobless claims. Canada will release Ivey PMI.