Asia:
China central bank frees up cash for banks ahead of Lunar New Year
China’s central bank said it will let some commercial banks temporarily keep fewer required reserves to help them cope with the heavy demand for cash ahead of the Lunar New Year holiday, a step that analysts say does not signal any policy shift. In recent years, the People’s Bank of China (PBOC) has provided some form of liquidity support for banks to deal with greater demand for cash from households and firms before the big holiday that starts between mid-January and mid-February. In 2018, the first day of Lunar New Year is Feb. 16. The mechanism the PBOC announced on Friday is the first that lets some national commercial banks trim the amount of reserves they need to keep with the PBOC. The move will help “promote smooth money market operations and support financial institutions’ financial services before and after the Spring Festival”, the central bank said. ccording to the PBOC statement, some banks will be allowed to lower their reserve requirement ratios (RRR) by up to 200 basis points, for 30 days. For major banks, the current RRR rate is 17 percent of their deposits. The PBOC statement did not specify when the arrangement to make more cash available will begin.
Europe:
German inflation rises more than expected in December
German inflation accelerated ahead of expectations in December, the Federal Statistics Office said on Friday, with consumer prices rising 1.6 percent year-on-year, compared to the 1.4 percent forecast by analysts polled by Reuters. The preliminary numbers, harmonised to make them comparable with inflation data from other European Union countries, also showed that prices had risen 0.8 percent compared to November, faster than the 0.6 percent increase analysts expected. High food costs made the largest contribution to the headline price increases, the agency said, followed by increased rents. Inflation figures from Europe’s largest economy are closely watched because of their influence on the European Central Bank’s monetary policy.
U.S.:
Dollar slips to three-month lows, heads for worst year since 2003
The dollar slipped to its lowest in more than three months against a basket of major currencies on Friday as the euro and sterling climbed, putting the greenback on track for an almost 10 percent fall over the year – its worst showing since 2003. The dollar started 2017 on a high, with the index that tracks it against a basket of six major currencies hitting its strongest in 14 years on hopes that new U.S. president Donald Trump would implement pro-growth, pro-inflation measures. But it has fallen back on doubts about Trump’s ability to push through those policies. And it has also lost out as growth has picked up outside the United States, with other countries’ central banks moving towards tighter monetary policy, lessening the gap between the Federal Reserve and others. “We are seeing synchronised global growth, in particular a very strong growth recovery in the euro area, which is leading the ECB (European Central Bank) to gradually normalise policy, which is helping the euro,” said Societe Generale currency strategist Alvin Tan. Tan added that the dollar had become overvalued against the euro, yen and sterling at the start of the year and so another part of the reason for its weakness in 2017 was a mean reversion in valuation.