Investors remain nervous about Evergrande's debt crisis
LONDON, September 22 - Sept Reuters - Risk-sensitive currencies such as the Australian dollar and Chinese yuan jumped on Wednesday after Evergrande said it would make an important bond coupon in 2018 to remove fear of a default.
Some of the excitement fizzled, however, after traders realized it was still not known whether the developer would be able to pay the coupon on its offshore dollar bonds due on Thursday.
The Australian Dollar rose as much as 0.49% to $0.7268 before giving up part of the gains to trade at $0.7247, up 0.2% on the day. The yen weakened by about 0.2% to 109,43 to the dollar, showing little reaction to the Bank of Japan's decision to keep policy on hold.
Risk assets are navigating calmer waters this morning, as the reopening of Chinese markets after a four-day holiday saw the People's Bank of China pump extra liquidity into the banking system through reverse repurchase agreements in a note to clients.
Also contributing to limiting losses in Chinese equity was the news that Evergrande has negotiated an interest payment for its bond due tomorrow. As a consequence, U.S. stock futures are pointing at a positive open and the FX market saw a dominance of risk-on moves with commodity currencies gaining against safe havens this morning. Investors are still nervous about the fate of Evergrande, which missed interest payments due to at least two of its largest bank creditors on Monday, Bloomberg reported.
The dollar index stood at 93.226 in London trading, staying not far off the one-month high of 93.455 on Monday evening.
The Euro hardly budged at $1.1725 after stabilising at a one-month low of $1.1700 on Monday.
Earlier, the safe-haven Japanese currency dropped to a July low of 127.93 yen as the common currency was supported by the cautious mood.
The Chinese yuan was fairly stable, bouncing slightly to 6.4748 per dollar in offshore trade, edging closer from a one-month low of 6.4878 set on Monday.
Another major focus for the day is the U.S. Federal Reserve, expected to drop more hints on its future policy path, including when to start tapering its bond buying and when to start raising interest rates
There are rising expectations the central bank will start signalling plans to start reducing its massive bond purchases in November if incoming data holds up.
The so-called dot plot which charts policymakers economic and rate projections, could offer clues on when the Fed will hike interest rates from near zero level
Longer-dated US Treasury yields continue to coil in a very difficult range and Fed expectations have been stuck in neutral for weeks with neither rising notably on the recent market volatility in risky assets.
The high probability of surprise at today's FOMC meeting suggests little anticipation of a surprise and keeps the bar rather low for a hawkish surprise scenario, as Fed Chairman Powell has been seen as unlikely to shift current expectations with Fed Chair Powell's dovish Jackson Hole speech on transitory inflation and a lower than expected August CPI data. 10- year U.S. Treasury yields traded at 1.3260% within recent ranges.
In Latin America, the dollar stood little changed, having shed gains made on Tuesday after Prime Minister Justin Trudeau's Liberals won a tightly held election.
For a tad bit longer, the Cryptocurrencies bounced back in the last session after plunges.
Bitcoin rose 5% to $42,754 after hitting a month low of $39,573. Ether rose 6% to $2,950, falling to as low as $2,732, down more than 30% from a four month peak struck earlier this month.
In March, the United States unveiled sanctions against a cryptocurrency exchange over its alleged role in enabling illegal payments from ransomware attacks.