China’s yuan won’t weaken much beyond level 7, says Capital Economics
According to Julian Evans-Pritchard, senior China economist at Capital Economics, China’s yuan is likely to break the 7 level against the greenback based on the two countries’ yield differentials. But the currency won’t weaken much beyond that, he told CNBC’s “Squawk Box Asia.”
“They are clearly stepping up intervention, with the goal of defending that threshold,” he said. “I don’t want to say that it won’t necessarily go through 7 temporarily, but I don’t think it will go much beyond that, certainly beyond the 7.2 that we saw during the trade war.”
China is reluctant to allow that to happen, Evans-Pritchard said.
“If it goes beyond that level, then expectations for the currency are at risk of becoming unanchored, risk of seeing capital outflows on a much larger scale. And that’s clearly something they would like avoid at this time,” he said.
The Chinese yuan was last traded at 6.9498 against the dollar.
— Abigail of
Australia’s central bank raises rates by half a point
The Reserve Bank of Australia raised rates by 50 basis points, in line with analysts’ forecasts in a Reuters poll.
This is the fifth consecutive increase since the central bank began raising rates in May.
Inflation in Australia stood at 6.1% in the June quarter, above the target range of 2% to 3%.
— Abigail of
Russian energy minister says price cap will lead to more Russian oil being sent to Asia
A worker walks from the Sans Vitesse accommodation to the gas receiving compressor station of the Nord Stream 1 natural gas pipeline in Lubmin, Germany, on Tuesday, August 30, 2022.
Krisztian Bocsi Bloomberg | Getty Images
Russian Energy Minister Nikolai Shulginov said the country will send more oil to Asia in response to price caps on its oil exports, Reuters reported.
“Any action to impose a price cap will lead to a deficit in (initiator countries’) own markets and increase price volatility,” he told reporters at the Eastern Economic Forum in Vladivostok, according to Reuters.
Last week, the G-7 economic powers agreed to cap the price of Russian crude to punish Moscow for its unprovoked invasion of Ukraine. Before the invasion, Russia exported about half of its exports of crude oil and petroleum products to Europe, according to the International Energy Agency.
—Natalie Tham
Japan’s real wage growth to remain negative amid rising inflation: Economist
Japan’s profit growth in July compared with a year earlier fell to 1.8 percent from 2 percent in June, new data showed on Tuesday.
This is mainly due to a slowdown in bonuses, Capital Economics Japan economist Darren Tay said in a note.
Tay said earnings should continue to moderate amid tough labor market conditions and an expected 3.3 percent hike in the minimum wage in the coming months.
“With inflation on track to top 3% by the end of the year, this means real wage growth is likely to remain negative over the coming months, but consumers will be able to draw on pandemic savings to finance consumption” , he said.
— Su-Lin Tan
Inflation in New Zealand may have peaked, but rates must rise: ANZ
Inflation in New Zealand has hit a record high of 7.3% in the second quarter of the year, partly due to a fall in oil prices from recent highs, ANZ Research said in a note.
“But we also think that getting inflation back to 2% is going to be a long journey, that it’s going to take [Reserve Bank of New Zealand to lift the official cash rate] to 4% by the end of the year and hold it for several years,” ANZ Research economists Finn Robinson and Sharon Zollner said.
The RBNZ raised rates to 3% in August.
Despite having peaked, economists say the risk of it rising again is present. For example, if labor costs rise, inflation is unlikely to return to the RBNZ’s 1% to 3% target range without the cash rate rising above 4%.
“Global inflation risks also abound, with extremely tight labor markets, climate change, geopolitical tensions, energy shortages and trade disruptions having the potential to lead to a sustained period of high global inflation going forward,” they said .
“This would also make the RBNZ’s job of returning inflation to target much more difficult.”
— Su-Lin Tan
The Reserve Bank of Australia was expected to raise rates again for the fifth time in a row
The Reserve Bank of Australia is expected to raise interest rates by another 0.5 percentage points on Tuesday due to a “fully employed labor market, a massive outpacing of inflation and the fact that financial conditions remain very accommodative,” Goldman Sachs’ chief Australian economist said. and New Zealand Andrew Boak said.
Boak told CNBC’s “Squawk Box Asia” markets don’t expect the central bank to soften its stance on curbing inflation when it announces its rate decision at 2:30 p.m. ET .
“I think the markets will be particularly sensitive to any kind of signal that the RBA is thinking about reducing the pace of tightening to say 25 basis point increments,” Boak said.
“I think the key language will remain around the expectation of further tightening over the coming months. But also the caveat that policy is not on a pre-set path.”
There are risks with continued interest rate hikes, such as the “disorderly easing of the housing market,” but Boak says “that’s not our central scenario.”
— Su-Lin Tan
CNBC Pro: Forget volatility. Buy this ETF for a long-term growth story, says the analyst
According to one portfolio manager, investors should navigate the current market volatility by entering ETFs with a long-term growth history.
“The idea of owning ETFs as opposed to one specific player — you own the whole basket and you’re riding the wave of more capital investment in cyberspace,” John Petrides, portfolio manager at Tocqueville Asset Management, told CNBC.
Name your favorite cybersecurity ETF, along with two others.
CNBC Pro subscribers can read more here.
– Weizhen Tan
Brent crude futures pare gains after OPEC+ production cut
CNBC Pro: Keep cash while it beats the market, say the pros
Strategists are urging investors to allocate more of their portfolios to cash during these volatile times, as rising interest rates mean it now offers higher yields.
“Cash was king” last month, Bank of America said in a Sept. 1 note, as most asset classes, including stocks, bonds and even commodities, record losses.
Here’s how to add it to your portfolios, according to the pros.
CNBC Pro subscribers can read more here.
– Weizhen Tan