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Events in China and Ukraine are dominant macro drivers

Weekend developments will dominate the first part of the week ahead. Two developments stand out. First, China announced a doubling of the permissible band from 1.0% to 2.0% around the daily fix. The PBOC deliberately and preemptively facilitated the narrowing of onshore and offshore yuan interest rates to avoid a new influx of capital that might have been spurred by the widening of the trading band. The second development over the weekend was the Crimean referendum.

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PBOC Announces CNY Band-Widening

PBOC Announces CNY Band-Widening

The PBOC announced a band-widening for USD/CNY over the weekend, doubling the allowable band around the fix rate to +/- 2%. Off of Friday’s fix, the new band is 6.01-6.26 vs. 6.07-6.20 previously. The USD/CNY band was last widened in April 2012 from +/- 0.5%, and before that in May 2007 from +/- 0.3%.

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Capex may be behind the sudden improvement in US loan growth

Capex may be behind the sudden improvement in US loan growth

Credit growth in the US seems to have stabilized and may be on the rise. It’s worth mentioning that the bottom in loan growth just happened to correspond to the start of Fed’s taper. Coincidence? Maybe. But why is corporate America increasing its borrowing all of a sudden? The most likely answer is the improvement in capital expenditures (capex), which is evidenced by firmer capital goods spending by US companies.

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Ukraine: Cutting Through the Media Spin

Ukraine: Cutting Through the Media Spin

By Doug French, Contributing Editor, Casey Research Figuring out what’s going on in Ukraine is like following the plot of Tinker Tailor Soldier Spy. Bloomberg reports Viktor Yanukovych’s ouster as “Moscow-backed,” while Al Jazeera calls Ukraine’s new government “Western-backed.” Which one is it? We’re supposed to trust what’s reported on the ground. But as wordsmith Theodore Dalrymple says, we should […]

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Russia and the Birth of the Eurodollar Market

Russia and the Birth of the Eurodollar Market

Talk that Russia could be behind the bulk of the more than $100 bln drop in the Federal Reserve’s custody holdings for foreign central banks, in the week ending Wednesday has many observers scratching their heads. This would represent about eighty percent of the dollar holdings.

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Latest data confirm China slowdown

Latest data confirm China slowdown

As a confirmation of a significant downward adjustment to China’s growth, a battery of economic reports yesterday morning all came in materially below expectations.

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EM: Escalation in Crimea, China concerns, Brazilian inflation and more

EM: Escalation in Crimea, China concerns, Brazilian inflation and more

By WIn Thin and Ilan Solot 1) The annexation of Crimea by Russia represents an important escalation of the crisis 2) China has re-emerged as a concern for markets 3) Turkish political tensions are rising again ahead of March 30 local elections 4) Brazil consumer inflation is accelerating, making central bank decisions more difficult going forward 5) Thai government may […]

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Green shoots in the US?

Green shoots in the US?

By Marc Chandler US retail sales rose 0.3% in February, a little more than expected. The news was blunted by sharp downward revisions to the January series, leaving the level of retail sales lower and pointing to somewhat less personal consumption to drive GDP here in Q1. The take away is that as the weather returns to a greater semblance […]

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Renzi’s Day

Renzi’s Day

The Chamber of Deputies approved the electoral reform bill that Renzi and Berlusconi had negotiated before Renzi squeezed out Letta to become Prime Minister of Italy. The bill goes to the Senate now.

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Japan: Negative current account will pressure currency

Japan: Negative current account will pressure currency

Remember that the rest of the world has so far accepted the experiment that is Abenomics not only because Japan has been running a current account deficit (thus making it more reasonable for Japan to weaken its currency), but also because the depreciation has so far been orderly. With a growing negative current account, the wheels are now set in motion for a decidedly disorderly depreciation of the JPY and one that could ultimately be life threatening for the Japanese economy.

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Russia: Economic Vulnerabilities

Russia: Economic Vulnerabilities

By Marc Chandler There is a common perception that Russia move on Crimea shows its strength. A closer examination suggests it is more complicated that it may seem. Like the bully at the school yard, the aggressiveness conceals weaknesses. Simply put, Russia felt threatened and for good reason. The democratic coup in the Ukraine threatened a potentially strategic loss for […]

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Bitcoin is not a currency

Bitcoin is not a currency

Japan has just decided that Bitcoin is not a currency, which subjects it to sales and income taxes. This is consistent with the view of the Canadian Revenue Service, which has found Bitcoin to be property and not a legal currency, and the United Kingdom, which leaning towards treating Bitcoin as a voucher and subject to VAT.

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