Paulson Criticizes China; Yuan Appreciation Not Moving Quickly Enough

[B]- [/B][B]Pau[/B][B]lson[/B][B] Criticizes China; Yuan Appreciation Not Moving “Quickly Enough”[/B]

  •       [B]Consumer Prices Rise In Singapore For Second Month, SGD Loses Ground[/B]


[B]Hong Kong And China[/B]
The Chinese yuan weakened slightly during the overnight as US Treasury Secretary Paulson placed pressure on Chinese officials, saying that the current pace of appreciation is not enough. Speaking in an interview with Charlie Rose, Paulson reiterated comments that were made last Friday, where he stated that Chinese officials “are not moving, in my judgment, quickly enough” on its currency regime. Subsequently, the tone matches the one expressed during the G7 meeting two weekends ago, and marks the potential end of the Treasury Secretary’s softer love stance on the currency. At the start of his tenure, Paulson approached the Chinese yuan appreciation topic with understanding and subtlety. However, now, with his back to the wall and obviously frustrated, Paulson is taking a more hardlined approach, siding with US Congressmen in requesting more tangible results. Although these recent statements would have sparked speculation on a potential revaluation, traders are siding with a more plausible domestic solution, ie higher interest rates. As a result, bidders took a backseat, albeit a temporary one, allowing the currency to come back to 7.7240 versus the 7.7100 hit last week.

The price action was similar in the Hong Kong economy as the HKD lost further ground against the US dollar. However, the directional bias was contrary to optimistic data that was released in the overnight. For the month of March, inflationary pressures rose the fastest in seven months as economic growth continues to foster higher consumer prices. With expansion in the air, producers and manufacturers are able to pass on higher prices with consumers fitting the bill. Notably, food imports from China are boosting wholesale prices in Hong Kong. For the month, food prices actually surged 7.8 percent on the month as an appreciating Chinese currency is making imports more expensive for Hong Kong consumers. Subsequently, property values and accelerated retail sales figures are propping up valuations. For the record, consumer prices jumped 2.4 percent on the year on year comparison, topping estimates of a 2.1 percent rise. With prices higher, the country’s central bank will ultimately look to ways of restricting money supply growth in order to curb inflationary pressures. The notion kept stocks underwater in the overnight session. Hong Kong’s Hang Seng index dropped 0.1 percent on the day, losing 10.02 points to close at 20,556.57. Leading decliners on the day were shares in China Mobile Ltd. and Jiangxi Copper Co. Both companies remained under the gun following some concerns over future near term earnings growth.

[B]USDHKD Meeting Resistance[/B]
Continuing to advance off of the 7.8125 support witnessed last week, the USDHKD is set for a retracement in the Asian session as momentum indicators trend downward. A death cross in the Stochastic measure is being backed by a longer term MACD divergence. However, a break lower through the current trend channel is required to maintain the offered tone. Barriers to the downside remain in the 7.8134 (200 hMA) and the 7.8132 (100 hMA) areas leading up to the 7.8125 trendline support figure. However, upside potential remains on a break above the 7.8155 trendline resistance, likely to lead to a move upwards to the 7.8173 (April 12th hourly spike high).

[B]Singapore[/B][B] Dollar[/B]
The Singapore dollar strengthened in the New York session following optimistic economic data and equity benchmark advances. The underlying currency strengthened to 1.5121, even testing right above the 1.5100 figure during the New York hours. Helping to boost SGD bullishness was the second consecutive monthly gain in inflationary pressures. Although most economies are likely to be concerned with interest rates being hiked, the recent consumer price acceleration only confirms that the Monetary Authority of Singapore will continue to keep the current policy in tact. Currently, the central body maintains its modest appreciation stance, allowing the underlying currency to strengthen in order to quell domestic inflationary pressures. For the record, consumer prices rose 0.7 percent on the year on year comparison according to the Department of Statistics. With rising employment and increased wages, consumer prices were notably supported by food prices. During the month, the subcomponent which makes up 23 percent of the index, rose 1.7 percent in the month. The figure continues the 2.7 percent pace seen in February and counters the 1.5 percent drop in transport and communication cost sub components. Incidentally, the rise helped to fuel stock gains as investors looked to the figure as representative of continued economic growth. Stocks advanced for the second session with SMRT Corp. leading gainers. The country’s largest subway operator surged on rampant rumors that the company had plans to merge with rival operator Comfort Delgro Corp. As a result, shares of SMRT jumped 11 cents to close at S$1.88. Subsequently, with advancers outweighing decliners on the day, Singapore’s Straits Times Index advanced by 27.81 points to close at 3,388.48, higher by 0.8 percent.

[B]Will We See 1.5050 In Singapore Dollar?[/B]
Momentum indicators are suggestive of further downside in the currency pair, following profit taking after the overnight’s jump. Currently at 1.5122, a stochastic death cross forms as the divergence in the MACD histogram deepens. As a result, with heavy topside resistance capping upside potential at 1.5130 (100 hMA), traders are setting their sights on the 1.5100 psychological figure in the Asian session. A break below the ominous figure may be the impetus for a move lower in testing 1.5050 in the short term. Comparably, any upside potential would see major barriers at the 1.5150 (200 hMA).