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July 24th - Marcel Thieliant, Head of Asia Pacific at Capital Economics, stated that the Bank of Japan (BOJ) may be more pessimistic about Japanese economic activity and is likely to keep interest rates unchanged at its meeting next week. Thieliant noted that although the BOJ believed in June that downside risks to economic activity had diminished, "we believe that the subsequent resurgence of oil prices has dampened the central banks optimism." Thieliant added that the BOJ will "certainly maintain its view that inflation risks are skewed to the upside." Capital Economics expects the BOJ to raise its policy rate to 1.25% in October.July 24th - SK Hynix and Samsung Electronics are about to face scrutiny from investors regarding memory chip demand. Currently, the South Korean stock market has become a key indicator of global AI market sentiment, but it is experiencing significant volatility driven by leveraged chip trading. Japanese competitor Kioxia will also release updates, addressing the issue of its market capitalization halved in just a few weeks, highlighting the continued risk of market volatility amid growing concerns that the AI-driven rally has gone too far. HSBC analysts point out that rising high-bandwidth memory (HBM) prices and the launch of the more expensive HBM4 chip, crucial for AI development, should support the performance of Samsung and SK Hynix, thus alleviating investor concerns about a slowdown in profits in the second half of the year.Hong Kong-listed AI stocks saw some gains, with Zhipu (02513.HK) rising over 10%.The yield on Japans two-year government bonds rose 1.5 basis points to 1.505%, hitting a new high since May 1995.On July 24th, the highest 7-day annualized yield of Tencent Wealth Managements "Current Account +" was 1.4950%, and the lowest was 0.7420%. The highest 7-day annualized yield of WeChat Pays "Lingqian Tong" was 1.0130%, and the lowest was 0.9240%. The highest 7-day annualized yield of Alipays "Yuebao" was 1.0620%, and the lowest was 0.9640%.

NZD/USD finds support near 0.6220; a decline appears more probable due to China's Covid concerns

Alina Haynes

Nov 28, 2022 15:04

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China's anti-Covid shutdown protests have weakened commodity-linked currencies, resulting in a gap-down start of roughly 0.6220 for the NZD/USD pair. During the previous week, the New Zealand dollar dropped after failing to surpass the round-level barrier of 0.6300.

 

Individuals have taken to the streets in China to demonstrate their opposition against the zero-tolerance policy, leading to a rise in civil unrest. Due to Chinese leader Xi Jinping's conservative posture and authoritarian framework, global markets have become more risk-averse. This has created an economic expansion risk and may worsen the already shaky housing market. Increasing apprehensions about societal risks may also result in political instability, which may have long-lasting detrimental effects on economic structure.

 

Notably, New Zealand is one of China's most important trading partners, and instability in China could damage the New Zealand Dollar.

 

In the meantime, the US Dollar Index (DXY) is profiting from investors' liquidity as the demand for safe-haven assets surges. The USD Index is hovering around 106.20 and attempting to reduce volatility as China's anti-locking protests restrict the upside and predictions of a slowdown in the Federal Reserve's larger rate hike cycle limit the downside (Fed).

 

S&P500 futures are under heavy pressure from market players due to a risk-averse market mentality. In anticipation of Fed chief Jerome Powell's address on Wednesday, yields on 10-year US Treasuries have decreased to approximately 3.68 percent. The Fed Chair's speech could dispel suspicions about a pause to the Fed's current rate-hiking program.