Commodity Dollars End the Day Lower, As PBOC Keeps MFL Rate at 2.50%
Risk assets have turned lower today after the PBOC left rates steady, while markets were expecting a 10 bps cut. Commodity dollars have suffered some considerable losses, despite higher economic growth forecasts for China for 2024. The NZD in particular has been hit the heaviest, losing nearly 60 pips from the highs early in the Asian session.
AUD/USD is down around 40 pips so far, while the Kiwi has broken below 0.62, however, the decline has stalled above the support zone at 0.6180. USD/CAD is also surging as the CAD feels the weight.
PBOC Leaves MLF Rate Unchanged at 2.50%
Today markets were expecting the PBOC to reduce its medium-term (MLF) rate to 2.4% from 2.5%. But they left it untouched, owing to concerns over currency devaluation. The People’s Bank of China MLF left its benchmark interest rate unchanged at 2.50%. This is the rate that Chinese banks can utilize to borrow cash from the People’s Bank of China for 6 months to a year, providing medium-term liquidity to commercial banks.
According to the most recent Reuters survey, experts do not believe China’s economic prospects will improve significantly next year. GDP growth is expected to drop to 4.6% in 2024, a small improvement from the 4.5% anticipated in October.
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