CURRENCIES | Risk Aversion
In the Dark
are concerned. A series of events triggered a wave of pessimism and dampened global risk sentiment. Most of the risky asset classes got annihilated as investors rushed into traditional safe havens such as US treasuries, gold and the Japanese Yen. It all started with poor
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December Chinese Manufacturing PMI data. The data underscored the ineffectiveness of central bank stimulus measures in reviving economic activity in the second biggest economy in the world and sent the Shanghai composite into a tailspin. The PBoC (People’s Bank of China) fixing the USD/CNY pair above the crucial psychological mark of 6.50 (four and a half year low for the Chinese Yuan) spooked Asian currencies. Domestic crisis quickly snowballed into a global
he year 2016 has not begun on a positive note at least as far as the financial markets
Considerable uncertainties surrounding China growth prospects and crude oil prices would be driving global risk sentiment, says Abhishek Goenka, Founder and CEO, IFA Global DMCC
phenomenon as investors got nervous about the impact a slowing China would have on global demand. Global growth concerns sent the commodities (crude and base metals in particular) and commodity linked currencies (Aussie Dollar, Kiwi Dollar, and Canadian Dollar, Russian Ruble) into a downward spiral. Several currencies fell to multi year lows against the US Dollar; few even hit all-time lows.
The Widening CNY-CNH Rift Investors dumped Chinese stocks listed on the offshore Hong Kong bourses resulting in rapid depreciation of the offshore Yuan (CNH). The spread between the onshore Yuan (CNY) and the offshore Yuan (CNH) widened to a mindboggling 1600 points at the peak of the frenzy as the offshore Yuan came under tremendous speculative attack. Speculators
www.wealth-monitor.com | February 2016
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