LONDON: The People's Bank of China said on Tuesday, Oct 19 it was raising its benchmark one-year interest rates by 25 basis points with effect from Wednesday.
Following are reactions from analysts and traders to the news.
HITENDRA DAVE, HEAD OF GLOBAL MARKETS, HSBC INDIA, MUMBAI:
"China hasn't raised so far and (they) have only been raising the reserve requirements. With all the asset price speculation, they had to raise rates to normalise policy. It is the local factors that led them to take this decision."
''
KORNELIUS PURPS, FIXED INCOME STRATEGIST WITH UNICREDIT IN MUNICH
"The authorities are eager to moderate the housing sector without dampening the overall economy's growth. This should not be interpreted as an impediment to global growth."
''
CHRIS TURNER, HEAD OF FX STRATEGY AT ING
"This is part of the moderate tightening cycle that we are seeing from Chinese authorities to balance their economy. It is part of the normalisation of interest rates in an economy which is growing at a modestly fast clip. The market is reacting like there is an increased risk of hard landing with the commodity currencies like the Aussie being sold off, but I don't think that is the case."
''
BEN SIMPFENDORFER, CHIEF CHINA ECONOMIST AT RBS
"A surprise, but welcome, hike. It suggests strong inflation and GDP figures on Thursday, but also some concern about property."
''
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:
"One thing is sure, that if they have raised interest rates now, then it creates ground for the yuan to appreciate. So it will be difficult for them to keep away the appreciation pressure on their currency".
''
KIT JUCKES, CURRENCY STRATEGIST, SOCIETE GENERALE, LONDON
"This means China is concerned that bank lending and domestic asset price inflation are too strong and they will have to accept a stronger currency.
"The gut reaction of the market is to sell commodity block and emerging market currencies. But it's not a game changer and there will probably be a queue of people looking to buy EM currencies on dips."
''
PARK TAE-GEUN, BOND ANALYST, HANWHA SECURITIES IN SEOUL
"The decision caught markets off guard. Raising lending rates is more than a liquidity control and can be taken as a tightening signal."
''
SIMON DERRICK, HEAD OF FX RESEARCH AT BANK OF NEW YORK MELLON
"The PBOC move follows a clear need by the Chinese authorities to take out some of the heat from the economy. Whether this move will lead to a broader move on its currency is open to debate. It certainly leads to speculation that the U.S. and China are in some sort of a deal which will perhaps see the U.S. taking a more gradualist approach to QE. The dollar has already moved higher after this news."
Following are reactions from analysts and traders to the news.
HITENDRA DAVE, HEAD OF GLOBAL MARKETS, HSBC INDIA, MUMBAI:
"China hasn't raised so far and (they) have only been raising the reserve requirements. With all the asset price speculation, they had to raise rates to normalise policy. It is the local factors that led them to take this decision."
''
KORNELIUS PURPS, FIXED INCOME STRATEGIST WITH UNICREDIT IN MUNICH
"The authorities are eager to moderate the housing sector without dampening the overall economy's growth. This should not be interpreted as an impediment to global growth."
''
CHRIS TURNER, HEAD OF FX STRATEGY AT ING
"This is part of the moderate tightening cycle that we are seeing from Chinese authorities to balance their economy. It is part of the normalisation of interest rates in an economy which is growing at a modestly fast clip. The market is reacting like there is an increased risk of hard landing with the commodity currencies like the Aussie being sold off, but I don't think that is the case."
''
BEN SIMPFENDORFER, CHIEF CHINA ECONOMIST AT RBS
"A surprise, but welcome, hike. It suggests strong inflation and GDP figures on Thursday, but also some concern about property."
''
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:
"One thing is sure, that if they have raised interest rates now, then it creates ground for the yuan to appreciate. So it will be difficult for them to keep away the appreciation pressure on their currency".
''
KIT JUCKES, CURRENCY STRATEGIST, SOCIETE GENERALE, LONDON
"This means China is concerned that bank lending and domestic asset price inflation are too strong and they will have to accept a stronger currency.
"The gut reaction of the market is to sell commodity block and emerging market currencies. But it's not a game changer and there will probably be a queue of people looking to buy EM currencies on dips."
''
PARK TAE-GEUN, BOND ANALYST, HANWHA SECURITIES IN SEOUL
"The decision caught markets off guard. Raising lending rates is more than a liquidity control and can be taken as a tightening signal."
''
SIMON DERRICK, HEAD OF FX RESEARCH AT BANK OF NEW YORK MELLON
"The PBOC move follows a clear need by the Chinese authorities to take out some of the heat from the economy. Whether this move will lead to a broader move on its currency is open to debate. It certainly leads to speculation that the U.S. and China are in some sort of a deal which will perhaps see the U.S. taking a more gradualist approach to QE. The dollar has already moved higher after this news."
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