Commodities took another beating today after China’s main stock index the Shanghai Composite plunged by 8.5%. The Chinese authorities have staged a massive intervention in recent months to try to stabilize the stock market.
The yen rallied in the wake of an IMF report on Friday. The IMF warned that Japan should prioritize its reform program again popularly called “abenomics” and not to rely on a weaker yen to solve its economic stagnation.
Commodity currencies were trading nervously in the run up to an announcement from the RBNZ’s monetary policy committee. New Zealand’s reserve bank is widely expected to lower rates by 25bp to 3.0% today.
The Australian dollar notched up a second day of rises against the greenback today. AUD/USD propelled upwards towards 0.7435 taking the level well clear of the deep low of 0.7327 that was reached last week.
The RBA will release the minutes of its last meeting later tonight. There is also a speech by bank head Glenn Stevens which is scheduled later tonight. These events will be closely watched for any change in sentiment as well as the economic outlook.
The Bank of Canada surprised markets for a second time this year by cutting their target “overnight” rate of interest to 0.5% from 0.75%. The Canadian dollar fell sharply on the news as did other high yields.
China was the main theme over the session once more. Markets drew some relief after the main Chinese stock indices rebounded sharply. This followed intervention by Chinese authorities blocking institutional selling.
Oil futures stabilized on Wednesday after experiencing some of the biggest falls in three months. Brent crude futures stabilized around the 56 dollar mark despite physical supplies of crude rising on the week.