​WAR: Yuan's fall sparks currency wars in emerging markets, Ruble falls more
QUOTE: Keep your face to the sunshine and you cannot see a shadow
MARKET PULSE

  • China set its reference rate 1.6 % lower at 6.3306 to the USD
  • China's 2nd currency devaluation in two day
  • PBOC: China's Yuan fixing today reflects yesterday's market close:
  • China's shock boosts USD in safety bid; AUD at six- year low
  • Currency rout goes global as former IMF Chief Jen sees risk of 50% loss on China
  • China's devaluation shock seen reigniting currency wars in Asia
  • First blood to Russian ruble in new currency war as decline exceeds Yuan
  • Vietnam widens dong's trading band after China devalues Yuan
  • PBOC will likely use open-market FX operations to try to reduce sharp volatility
  • PBOC implies to restore CNY competitiveness on a REER basis
  • Greek deal hits German turbulence as lawmakers balk at timetable
  • Today: Euro-zone industrial production
  • Today : U.K. jobless claims and unemployment rate
  • The DJIA fell 212.33 points, or 1.21 %, to 17,402.84
  • RBI is likely to continue buying FX as reserves
  • RBI FX reserves should be sufficient to weather two contagion shocks ($20 Billion each)
  • India- Will not become a part of the currency wars


INR
MARKETS

  • INR falls 0.6% to 64.62 per USD, weakest since Sept. 2013
  • 1-month implied volatility falls 2 bps to 6.32%; average for past 12 M. is 6.6656%
  • INR 1-month forwards drop 0.7% to 65.06 per USD
  • USD/INR Pivot at 64.1725
  • USD/INR support at 64.0688, 63.9326, 63.6927
  • USD/INR resistance at 64.3087 and 64.4124 broken, next at 64.6523
  • USD/INR moves above upper end of Bollinger band at 63.4314

FACTORS

  • India's July CPI estimated at +4.4% YoY , prior was +5.4%; June
  • India's industrial production estimated . at +3.3% YoY, prior +2.7%
  • Global investors bought net $10.8m of Indian stocks on Aug. 10:
  • India's leading stock index Sensex down 0.8% yesterday
  • RBI is likely to continue buying FX as reserves
  • RBI FX reserves should be sufficient to weather two contagion shocks ($20 Billion each)


FOREIGN EXCHANGE
MARKETS

  • USD/JPY +0.10% at 125.25 (range 125.04-125.26)
  • EUR/USD +0.16% at 1.1060 (range 1.1025-1.1065)
  • AUD/USD -0.79% at 0.7246 (range 0.7216-0.7326)
  • USD/CAD +0.21% at 1.3142 (range 1.3084-1.3158)
  • GBP/USD -0.15% at 1.5549 (range 1.5535-1.5589)
  • USD/CHF -0.18% at 0.9863 (range 0.9861-0.9890)



FACTORS

  • China set its reference rate 1.6 % lower at 6.3306 to the USD
  • China's 2nd currency devaluation in two day
  • PBOC: China's Yuan fixing today reflects yesterday's market close:
  • China's shock boosts USD in safety bid; AUD at six- year low
  • Currency rout goes global as former IMF Chief Jen sees risk of 50% loss on China
  • China's devaluation shock seen reigniting currency wars in Asia
  • First blood to Russian ruble in new currency war as decline exceeds Yuan
  • Vietnam widens dong's trading band after China devalues Yuan
  • PBOC will likely use open-market FX operations to try to reduce sharp volatility
  • PBOC implies to restore CNY competitiveness on a REER basis
  • Greek deal hits German turbulence as lawmakers balk at timetable
  • Today: Euro-zone industrial production
  • Today : U.K. jobless claims and unemployment rate
  • The DJIA fell 212.33 points, or 1.21 %, to 17,402.84



GOLD
MARKETS

  • Gold spot lost 0.6 % and gained 0.4 % before trading at $1,112.48 in Asia
  • Gold December Futures fell 0.4 % to $1,103.80
  • Silver fell 1 % to $15.2095

FACTORS

  • China's 2nd currency devaluation in two days
  • Weaker Yuan would make it more expensive for China to import gold
  • The Weaker Yuan could potentially extend the weak Chinese demand