Forex Market Commentaries - SHIBOR

SHIBOR, Will This Be The Acronym Of The Decade For FX Traders?

Jan 30 • Market Commentaries • 3914 Views • 1 Comment on SHIBOR, Will This Be The Acronym Of The Decade For FX Traders?

There’s widespread industrial action in Belgium today as unions call a strike to mark today’s summit meeting. The general strike, Brussels’ first action in almost two decades, forced the authorities to shut the country’s rail network leaving many trams and buses without drivers. Some international flights have been cancelled, while some bulk cargo terminals have been shuttered at the port of Antwerp.

Portuguese borrowing costs have hit all-time highs this morning, as fears grow that it will need a second bailout. The yield (interest rate) on Portugal’s 10-year bonds is approaching 16%, this is twice the level which is regarded as being sustainable.

Data released this morning showed that Spanish GDP fell by 0.3% in the last three months of 2011, compared with the pervious quarter. That’s the first contraction in eight years.

EU leaders are predicted to sign off on a permanent rescue fund for the euro zone at a summit on Monday and are expected to agree a balanced budget rule in national legislation, with unresolved problems in Greece casting a shadow on the discussions.

The summit, which is the 17th in two years as the EU battles to resolve its sovereign debt problems, is supposed to focus on creating jobs and growth, with leaders looking to shift the narrative away from politically unpopular budget austerity.

SHIBOR
China wants to transform Shanghai into an international financial centre on par with the likes of New York and London by 2020. That goal was set in 2009 by the State Council and analysts have taken it as a broad deadline for liberalising the currency.

China intends to establish Shanghai as the global centre for yuan trading, clearing and pricing over the next three years as part of wider plans to make the commercial hub an international financial centre by 2020. Currency traders interpret the statement partly as a message from Beijing that the yuan’s movements, increasingly been influenced by the offshore market over the past few months, should be decided by the government.

The plan also aims to make the government-backed Shanghai Interbank Offered Rate (Shibor) the benchmark for yuan credit everywhere and targeting to more than double the annual non-forex financial market trading volume to 1,000 trillion yuan by 2015.

China has taken a series of measures over the past two years to invigorate the offshore yuan market in Hong Kong as part of a longer-term plan to promote the use of the yuan overseas and make it a fully-convertible and international reserve currency along with the U.S. dollar.

Earlier this month, Britain said it was teaming up with its former colony to secure London a top spot as an offshore trading centre for the yuan.

 

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Market Overview
European stocks dropped and the euro weakened before regional leaders meet to discuss the debt crisis and Italy sells bonds. Chinese shares sank in the first day of trading after the Lunar New Year holiday.

The Stoxx 600 Index slumped 0.6 percent as of 8:20 a.m. in London, paring its gain for the month for 3.8 percent. Standard & Poor’s 500 Index futures retreated 0.5 percent. The euro slid 0.4 percent, snapping a five-day advance against the dollar. Australia’s dollar fell 0.9 percent, weakening against all of its 16 major peers. Treasury five-year yields extended declines to a record low of 0.7299 percent. Copper tumbled 1.5 percent.

The euro weakened after climbing 2.2 percent versus the dollar last week. Italy sells debt maturing in 2016, 2017, 2021 and 2022 today, after the country was downgraded by Fitch Ratings last week. The common currency lost 0.4 percent to 100.95 yen.

New Zealand’s currency fell 0.7 percent to 81.92 U.S. cents, ending its six-day advance, the longest since March. Central bank Governor Alan Bollard won’t seek another five years when his current term ends Sept. 25, the Reserve Bank of New Zealand said in an e-mailed statement today.

Copper for delivery in three months dropped 1.5 percent to $8,395 a metric ton on the London Metal Exchange. Nickel, zinc and aluminium lost at least 1.4 percent. Crude oil for March delivery fell 0.7 percent to $98.84 a barrel on the New York Mercantile Exchange.

Market snapshot as of 10:30 am GMT ( UK time)

Asian and Pacific markets mainly finished in the red in the overnight and early morning session. The Nikkei closed down 0.54%, the Hang Seng closed down 1.66% and the CSI 300 closed down 1.73%. European bourse indices have had a negative morning. The STOXX 50 is down 0.9%, the FTSE is down 0.62%, the CAC down 0.97% and the DAX down 0.8%. The IBEX is down 1.28%, Spanish GDP figures of -0.3% affecting the domestic equity market, this index is down circa 20% year on year but at 8545 has recovered substantially from the lows of 7640 in September. ICE brent crude is down $0.52 a barrel whilst Comex gold is down $13.2 an ounce.

The euro fell 0.7 percent to $1.3133 at 10:04 a.m. London time, after rising 2.2 percent last week. The common currency fell 0.6 percent to 100.76 yen. It dropped 0.2 percent to 1.2053 Swiss francs after sliding to 1.2052, the weakest level since Sept. 20. The dollar was little changed at 76.69 yen.

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