Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Categorized | Currencies

Oil currencies poised to get a boost if Opec secures output cut


Posted on November 29, 2016

The oil price has been unsurprisingly choppy in the lead-up to Opec’s meeting in Vienna on Wednesday. Will a deal to curb or cut production be reached?

Perhaps more importantly, will any deal be adhered to? Sceptics expect “yes” for the former and “no” for the latter.

But forex strategists at UniCredit think there is a greater chance of positive outcomes for oil-related currencies from the Opec meeting.

Brent crude has pulled back by several dollars from the recent peak it reached following the Algiers proposal to cut production, “suggesting that the market has priced out a considerable amount of the initial optimism”, said the Italian broker.

“In this sense, if Opec members this Wednesday do not agree on cutting production, sustained downside in oil prices and hence oil-related currencies appears to be limited.”

Alternatively, any deal deemed credible should cause a jump in oil prices, and — providing the US dollar (USD) does not see another surge higher — should boost the usual commodity currency suspects such as the Canadian dollar (CAD) and Russian rouble (RUB), said UniCredit.

It has looked at longer term correlations with the oil price and those currencies.

“We find that, should the oil price rise towards $55 a barrel, this by itself would be consistent with USD-RUB at around 60 (ie. a gain of 8 per cent for the RUB) and USD-CAD at 1.27 (ie. an appreciation of roughly 5.5 per cent for CAD).”

jamie.chisholm@ft.com