Paulson Downplays Likely Benefits Of Chinese Yuan On Surplus

- Paulson Downplays Likely Benefits Of Yuan On Surplus

  • [B]Singapore[/B][B] Dollar Weakest In Six  Weeks[/B]

  • [B]Hong Kong[/B][B] Stocks Advance First In Three  Sessions[/B]

Paulson Downplays Effects Of Yuan
Speaking at an event sponsored by the Peterson Institute for International Economics today in Washington, US Treasury Secretary Henry Paulson stated it would take more than an appreciation in the Chinese yuan to reduce the current trade surplus. Reiterating that the domestic currency is appreciating “very slowly” against the dollar, Paulson noted that there is not a whole lot that policy makers can “do with the currency that would make a big difference.” Recently policy makers, in attempts to curb inflationary pressures and a widening trade surplus, have raised interest rates and reserve requirements held by domestic banks. Unfortunately, the attempts have fallen to the wayside as the economy continues to expand at a torrid 11 percent pace. The conditions have turned the focus to potential revaluation of the currency in order to aggressively quash domestic price increases. Incidentally, Paulson will be hosting a delegation led by Vice Premier Wu Yi in Washington later this month on a number of topics, including further flexibility of the currency regime as well as piracy laws that have come under attack by various nations.

SGD Drops On Regional Currency Declines
The Singapore dollar came under some pressure in the overnight as regional currencies like the Taiwan dollar and South Korean won declined throughout the session. The pressure helped to push the underlying currency to the weakest it has been in six weeks, alleviating some speculation of further advances on the record high hit weeks ago. However, the regional stock market remained resilient in the wake of the depreciation, rising the most in a week. Leading shares higher was stock in the banking sector, notably DBS Group Holdings Ltd. Real estate shares were also bid higher as investors saw opportunity in the recent pullback, picking up shares of Keppel Land Ltd. Shares of the nation’s largest bank, DBS, rose 40 cents to close at S$21.70 as Keppel stock closed higher by 70 cents at S$9.55. As a result, the Straits Times Index was able to surge ahead by 56.52 points or 1.7 percent to 3,417.81.

Hong Kong Stocks Advance At The Open
Advancing for the first session in three days, the Hang Seng index was boosted by news that HSBC Holdings PLc was a approached by the Shanghai Stock Exchange in attempts to allow the lender to list its shares on the exchange. Boosting the brand visibility in one of the world’s fastest growing markets, the offer comes as an opportunity to exploit the recent speculative runup in the country. Benchmark stock indexes in the country have more than doubled in the last year as investors seek to retain higher returns on domestic capital. Shares of Europe’s largest bank by market value were runup HK$1.10 to HK$145.40 in the overnight. As a result, the Hang Seng benchmark index added 69.51 points to close at 20,388.49. Notably, China Citic Bank Corp shares lost 5 cents to close at HK$6.52. Holding the world’s biggest initial public offering this year, the lender said it sold blocks totaling 732.8 million in Hong Kong at the offer price of HK$5.86 each.

Technically Speaking

Singapore Dollar Weakness Prevails - Spiking higher the USDSGD currency pair ran through key resistance in the overnight, taking out the 1.5200 and 1.5250 psychological barriers. Failing to effectively test the 1.5300 psychological figure, the pair has come back a bit, consolidating into the Asian session. Although momentum indicators are indicative of a slightly pullback, preliminary assessments are citing a potential double top prior to the downturn. However, MACD is already showing a downward cross, reflective of the massive divergence in price action. As a result, following another attempt at the 1.5300, sellers will look for breaks below at the 1.5250 and 1.5224 (50 hMA) before making headway into the 1.5200 (100 hMA). However, should the 1.5300 ceiling fail to hold, bulls are set to target the 1.5350 with ease.