ICYMI – yuan rocketed higher with the PBOC slamming the fix, and promoting capital inflow

Eyes were on the People’s Bank of China Loan Prime Rate setting today:

• PBOC Loan Prime Rates (LPR) remain unchanged at today’s rate setting, as expected

But the PBOC surprised with two moves elsewhere.

The reference rate was hit with a huge hammer, the Bank set the rate 700+ points lower than the reported expected:

• PBOC sets USD/ CNY reference rate for today at 7. 1466 (vs. estimate at 7.2233)

Secondly, the bank eased its macro-prudential adjustment parameter, raising it to 1.5 from 1.25. This eases companies and financial institutions’ cross-border financing, enabling more foreign capital inflows.

• PBOC eases cross-border funding

CNH has rocketed higher on the twin moves:

In turn this has fed through to a higher AUD (AUD likes a stronger yuan as at the amrgin it gives China extra $ to buy Australia’s goods and services). AUD also supported by another solid jobs report:

• Australia (June ) Jobs +32.6K (vs. +15K expected) & Unemployment rate 3.5% (vs. 3.6% exp)

This article was written by Eamonn Sheridan at www.forexlive.com. Source