Stock Rally Tested by Rise in Yields; Yen Climbs: Markets Wrap
Bloomberg reported that Chinese authorities were considering slowing or stopping the purchase of US Treasury debt, but China shot it down as "fake news".
"We think it is either a quote from some wrong sources, or a piece of fake news", a SAFE spokesperson said in the statement (link in Chinese).
The dollar had been on the back foot even before the news report as the Bank of Japan's move to trim its purchases of long-dated government bonds (JGB) this week reverberated across currency markets. "The market seems to have been looking for one-sided news to sell the dollar this week".
"China is the largest single foreign holder of United States debt, but their incremental changes tend to be small relative to other flows in the market and in recent years some periods where holdings have fallen correspond with risk-off moves that see yields move lower, sometimes helped by fears over China growth", he said.
Global stocks stabilized Thursday after a tumble the day before that was triggered by reports, later rejected, that China may slow its massive purchases of USA government bonds. The VIX implied volatility index, the markets' so-called "fear gauge", hovered just above 10 on Thursday, from as low as 8.92 on January 2.
U.S. Treasury yields jumped to 10-month highs on Wednesday.
Rajeev de Mello, head of Asian fixed income at Schroders Investment Management, told CNBC on Thursday that China will not just "lay passive" if the USA administration imposes trade tariffs. "It appears China is quick to touch the Achilles heel of the States", he added.
"To date, US inflation pressures have remain muted".
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But the Eurasia Group analysts said that China had more targeted tools to pressure the USA and retaliate against trade measures.
The euro EUR= was up 0.77 percent to $1.2037, on pace for its biggest single-day percentage gain against the greenback in about two months.
The largest currency market move has come from the Japanese yen with the USD/JPY sitting up 0.26% at 117.71, recovering after hitting a low of 111.33 earlier in the session.
The yen was buoyed this week after a cut in the Bank of Japan's bond buying on Tuesday fueled speculation that the central bank could eventually seek to exit from its stimulus later this year, following in the footsteps of other major central banks.
Following the market's movement, bond veteran Gross, who is portfolio manager of the Janus Henderson Global Unconstrained Bond and Total Return strategies and a member of the global macro fixed income leadership team, took to Twitter on Tuesday to say "bond bear market confirmed".
BITCOIN: Bitcoin prices gyrated, sinking about 13 percent according to website Coindesk, after South Korea's justice minister said it plans to ban crypto currency trading.
The greenback extended losses after data showed USA producer prices fell for the first time in almost 1-1/2 years in December amid declining costs for services.
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