Interesting news overnight and a sign of the times; China’s central bank sends tightening signal by lifting short term rtes. The first trading day after the long New Year holiday started with a bank in China as the bank lifted rates on open market operation repos by 10 basis points, effective today. Another signal that authorities are focusing on trying to control a real estate bubble, but some see it also as a way to try and halt the depreciation of the yuan, even if the rate rise focuses on reverse repos. According to Reuters two sources said authorities also raised the lending rates on its standing lending facility (SFL) short term loans.
The USDJPY has continued to trade with volatility, rallying back above 113.00 from a two-month low at 112.05 in the latest phase. An abatement in risk aversion in global markets aided the pair higher during the New York session yesterday, and while stock markets in Asia have come back under pressures (Chinese markets, open for the first time in a week after the lunar new year break, took a tumble), the BoJ today conducted its first operation to buy 10-year JGBs, which drove Japanese yields sharply lower. Also in the mix of market drivers is expectations for a strong U.S. payrolls report following strong ADP employment data and a solid ISM jobs component. The 1 hour chart looks bullish over 113.00 and a LONG position was taken with a target of 30 pips.
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