A Chinese article by Chinese agency China Economic, 'CE', is doing the rounds that say the minutes of the Fed’s December 2021 meeting was like a blockbuster “bomb” affecting markets in the Asia-Pacific region.
The article in the Chinese news agency website states that the Chinese renminbi exchange rate may become an important balancer for internal and external equilibrium, and exchange rate flexibility is expected to further increase.
Key notes (translated on Google Translate)
''Amidst the changes, the "self-oriented" characteristic of China's monetary policy will become more prominent.''
''Institutions generally believe that domestic monetary policy in 2022 will not follow overseas tightening. Not only that, under the requirement of "more proactive and promising", there is a high probability that monetary policy will be further loosened on the margin, and there is a possibility of reducing the RRR and interest rates in 2022.
This also means that in the future, the spread between Chinese and foreign interest rates is likely to narrow, which in turn may have a certain impact on capital flows and asset prices.''
''Some organizations believe that my country’s proactive fiscal policy will enhance efficiency and play a more critical role in stabilizing the macroeconomic market.''
''Monetary policy needs to grasp the rhythm and intensity, make good use of the "time window" before accelerating overseas tightening, and move forward. At the same time, the RMB exchange rate flexibility should be strengthened, and the functions of exchange rate adjustment macroeconomic and balance of payments automatic stabilizer should be brought into play.''
This is good news for Asia-Pac markets but a potential headwind for the Aussie should the central bank divergences continue to play out as follows:
''The Fed's communication meant that there will be a much quicker timeline between rate hikes and balance sheet runoff than the last time, as such, it is full steam ahead with respect to the central bank divergences. Overall, that spells a lower Aussie for the weeks ahead which leaves the weekly technical outlook intact as follows:
On a break of weekly support, near 0.7150, the prospect of a downside continuation will be in play. Meanwhile, there is room for a correction to the old daily support near 0.72 the figure.''
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.