China launches QE variation; Shanghai markets approve; EM finance chiefs tell US to raise rates; UST 10yr yield 2.09%; oil down, gold higher; NZ$1 = 67.3 US¢, TWI-5 = 71.2

Here’s my summary of the key events overnight that affect New Zealand, with news – unusually – from Peru.

But first from China, their central bank is expanding an unconventional easing program to boost bank lending, stepping up its repertoire of monetary-stimulus measures to arrest the country’s economic slowdown, but also taking on more risk itself.

The PBoC will let more commercial lenders use loans as collateral to borrow cheap funds from the central bank. The commercial banks are then supposed to use the money to steer loans to parts of the economy deemed crucial for China’s growth, such as small and private businesses. It’s a variation of the Western QE programs, and like them it will expose the central bank to commercial risk.

Local markets like the initiative with Shanghai stocks up strongly on the announcement. Their index was up +3.3% yesterday.

In Peru, the annual meeting of the IMF and World Bank has revealed an interesting frustration with the US Fed. Finance ministers there have told their American counterparts that they should just get on and raise interest rates if it is justified by US conditions. The Malaysians even said, if EM countries have borrowed too much, the Fed waiting so as to ease their burden won’t solve anything. It seemed like a unanimous message – just get on with an increase.

In New York, the UST 10yr yield benchmark is unchanged at 2.09% however.

The US benchmark oil price is lower today at US$47.50/barrel, and the Brent is lower as well at US$50.50/barrel. It seems the US shale industry has reshaped the global oil market permanently.

The gold price has continued its strong run in New York, gaining another $10 to US$1,167/oz.

The New Zealand dollar starts higher again today. It is now at 67.3 US¢, at 91.3 AU¢, and 59.2 euro cents. The TWI-5 is at 71.2 in what is now a three week continuous rise and we are at our highest level in three months.

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here »

Daily exchange rates

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for(i=0;i

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