By Rae Wee and Vidya Ranganathan

SINGAPORE (Reuters) – is sliding and market participants suspect authorities are deliberately but slowly engineering a light depreciation of the currency, both to complement an easy monetary policy and to support exports.

Several signals have stirred that speculation. While the yuan has declined roughly 2% this year against the dollar, it has become relatively less competitive as Japan’s yen and currencies of other neighbours South Korea, Thailand and Taiwan drop more sharply.

The People’s Bank of China (PBOC) also appears to have loosened its grip on the yuan, allowing it to fall to the weak side of the 7.2-per-dollar level that state-owned banks had staunchly defended in the past, though it has continued to lend some support through stronger-than-expected settings of the daily mid-point for the currency.

Last Friday, traders took the absence of state banks in the market to push the yuan to 7.23 to a dollar initially, and even though state banks eventually stepped in the yuan saw its biggest daily drop in nearly 3 months.

Analysts at National Australia Bank (OTC:) (NAB) said it was “more than coincidental” that the PBOC’s defence of the yuan had relaxed in the same week the Bank of Japan abandoned its negative rates and yield-curve control policy.

Though the BOJ’s policy shift last week was momentous, Japanese yields are still barely positive and the yen has ironically weakened further. It is down 7% this year against the dollar this year alone, and at a 30-year low against the yuan.

“Concerns at loss of export competitiveness vis-à-vis Japan too have motivated Friday’s decision to lift the 7.20 cap,” NAB analysts Ray Attrill and Rodrigo Catril wrote this week.

The yuan’s trade-weighted index is up 2% so far this year as currencies of China’s trading partners have weakened, gnawing away at the country’s export competitiveness and hobbling its uneven economy recovery.

The index is at 99.30, far above the 92-98 band that analysts think the PBOC is comfortable with.

The PBOC did not respond to a Reuters request for comments.

FLOWS AND OTHER FORCES

Even though China’s exports seem to have rebounded early this year, the manufacturing sector is struggling, and weak export orders suggest the sector needs more support. A weak yuan would help lift export earnings.

Analysts at Oxford Economics expect the monetary policy divergence between the U.S. Federal Reserve and PBOC to keep the yuan weak in the first half of 2024, but wrote that “any depreciation ahead is likely to be highly controlled”, and projected the yuan will not fall beyond 7.34, a level last seen in September.

UBS strategists Rohit Arora and Teck Quan Koh also reckon there could be a shift in Beijing’s policy priorities, similar to the yuan’s decline in the second half of 2022, when it gradually fell nearly 9% to as far as 7.328.

“Put another way, we don’t expect authorities to allow yuan to be fully market-driven, but continue with a managed and orderly adjustment process,” they said.

Barring another big boost for the U.S. dollar, they expect the yuan will head slowly for 7.4.

Indeed, the steady outflows from frail mainland stock markets and other speculative bets might require the PBOC to dampen volatility, as it does normally through state banks.

One such pressure point is the yuan’s increasing use in ‘carry trades’ in which investors borrow in a currency with low interest rates and invest the proceeds in a higher-yielding currency.

Returns on yuan-funded carry trades are lower than that on yen-funded ones, where an easy 5% annualised gain can be made on 3-month swaps. But traders expect the yen to be more volatile under the BOJ’s new policy regime, while the yuan has traditionally been sheltered.

“From where I sit, the only thing preventing the yuan from meaningfully weakening is active policy guidance from PBOC,” said Rong Ren Goh, a portfolio manager in the fixed income team at Eastspring Investments.

Goh has been using the as a funding currency since the beginning of the year, shorting the currency and investing in high-yielding assets such as Indian rupee bonds.

“If you’ve held a long dollar-CNH position since the beginning of the year, you would have already earned more than 400 pips of carry and capital gains,” Goh said.

The Japanese Yen is in focus in the currency market today after it fell to its lowest rate against the US Dollar in over 3 decades, prompting warnings from Japanese Finance Minister Suzuki which gave the Yen a little strength.

1. The major market news item today is the weakness of the Japanese Yen. As Japanese officials made clear that monetary policy would remain “accommodative”, the Yen fell against all major currencies, most notably against the US Dollar as the USD/JPY currency pair rose to reach its highest price since 1990 just below ¥152. Japanese Finance Minister Suzuki then gave his usual warnings about not “ruling out any steps” with a “high sense of urgency”. This brought the USD/JPY down from almost ¥152 to ¥151.50. Trend traders will still be interested on being long of the USD/JPY and in being short of the Japanese Yen in general.
2. The minor commodity Cocoa continues to dominate the news as it rises again to new all-time highs with volatile gains – yesterday it increased by about 5% to reach $10,000 for the first time. The commodity superfood has almost tripled in value over the last year alone, with many analysts suggesting supply side shortages are at least partly to blame for the meteoric rise. There is more and more demand for Cocoa every year as it is coveted as a key ingredient for chocolate but also as a superfood in its own right. Trend traders will be interested on the long side, although which such high volatility and sharp gains, it could come crashing down at any time, so trend traders must be careful to use a disciplined stop loss if going long. As well as Cocoa futures, there are Cocoa ETNs available which may be more suitable for retail traders and investors.
3. Bitcoin is rising again and trading above $70,000 not far from its recent record high near $74,000, despite crypto funds seeing record outflows last week.
4. Gold is continuing to look quietly bullish and may well test its recent record high over the coming days, although it is still some way off. Trend traders will also be interested in the long side here. However, it does seem to keep getting sold every time it reaches $2200.
5. The earlier release of Australian CPI (inflation) data showed the annualized rate unchanged at 3.4%, when it was expected to rise slightly to 3.5%. The data barely affected the Australian Dollar, but it has sent the Australian stock market higher as it’s a minor dovish surprise.
6. Yesterday’s release of US CB Consumer Confidence data was slightly worse than expected, suggesting consumer demand is slowing which might be good news on interest rates.

As things stand PEPE is on course to end March 2024 with over 200% month-on-month gains.

Strategic investors looking to enter new markets often seek out strong performing assets with minimal media hype.

Hence. this resilient price performance in the second half of March, under the media radar, could put PEPE in good stead for another major breakout in the coming weeks.

PEPE price forecast: Bulls looking to build on 200% gains

Based on the on-chain insights analyzed above, PEPE price looks set to enter another leg-up above $0.000010 in the coming weeks.

Existing investors are holding on to their tokens, despite 200% gains and minimal media traction. This alignment could attract eagle-eyed new entrants, the demand surge could propel PEPE price into another parabolic break out.

The Bollinger bands technical indicator also affirms this stance. It shows that PEPE has just broken below the 20-day Simple Moving Average (SMA) price.

Strategic trader could interpret this as a perfect timing to enter the market. If the bullish scenario plays out, the bulls could set their sights on the $0.000012 area, just above the previous market top.

According to blockchain analytics platform Spot On Chain, cryptocurrency exchange KuCoin experienced roughly $500 million worth of withdrawals just hours shortly after the U.S. government slapped it with criminal charges.

The exchange lost $274 million worth of Tether (USDT), $55 million worth of Ethereum (ETH), $46 million worth of Ondo (ONDO) as well as millions of dollars worth of other tokens.

Despite the mass exodus, the exchange’s hot wallets continue to hold roughly $3.6 billion worth of cryptocurrencies. 

As reported by U.Today, KuCoin and two of its founders (Chun Gan and Ke Tang) have been charged with violating the Bank Secrecy Act. The duo has been accused of making the trading platform “a haven” for money laundering. 

The exchange has been accused of misleading investors about the composition of its user base. 

KuCoin failed to obtain necessary regulatory approvals in the US despite the fact that US citizens accounted for 17% of its users. 

Jake Chervinsky, chief legal officer at Variant, has stated that the legal action against KuCoin should not be surprising to anyone who has followed US enforcement over the past few years. “The simple lesson: if you want access to the US market, you need to follow US law,” he added.

The exchange seemingly remains defiant despite its legal predicament. In a post on X, it has clarified that the assets of its users remain “absolutely safe.” KuCoin’s lawyers are currently investigating the details of the DOJ charges, according to the post. 

The exchange has also acknowledged that withdrawals are now taking longer than usual due the volume of transactions. 

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Investing.com– Most Asian currencies retreated on Wednesday, with the Japanese yen hitting its weakest level since 1990 as the dollar firmed ahead of more cues on inflation and the Federal Reserve later this week.

Trading volumes were also somewhat muted ahead of the Good Friday holiday.

USDJPY at 1990 highs on dovish BOJ speak, intervention in focus  

The yen weakened on Wednesday, with the pair rising as much as 0.2% to 151.97- its highest level since mid-1990.

Weakness in the yen was initially triggered by comments from BOJ board member Naoki Tamura, who said that the central bank will have to proceed slowly and steadily towards normalizing its ultra-loose policy in the coming months. His comments furthered the notion that the BOJ will remain largely dovish in the near-term, presenting little support for the yen.

But further losses in the yen were limited by the prospect of government intervention in currency markets. These fears were in play especially after top Japanese currency diplomats warned that they would not rule out any measures in arresting the yen’s slide.

Finance Minister Shunichi Suzuki said on Wednesday that he would take “decisive steps” against excessive currency moves, echoing his comments from 2022, when the government engaged in record-high levels of intervention to support the yen. 

Chinese yuan fragile, USDCNY pushes higher above 7.2 

Among other Asian currencies, the Chinese yuan remained weak, with the pair rising further above the 7.2 level as sentiment towards the country remained largely dour.

Weakness in the yuan came despite a series of stronger midpoints from the People’s Bank of China, while recent reports also showed the PBOC instructing major state-owned banks to sell dollars and buy yuan.

Sentiment towards Chinese markets remained largely negative, pressuring the yuan as traders saw little improvement in the economy so far in 2024. rose 10.2% in the first two months of the year, but a bulk of the rise was driven by a weak base for comparison from 2023. 

Dollar pinned near 1-mth high before PCE data, Fed speakers

The and rose 0.1% each in Asian trade, extending overnight gains and remaining squarely in sight of recent one-month peaks.

Traders remained biased towards the greenback in the wake of dovish signals from other major central banks, while anticipation of data- the Fed’s preferred inflation gauge, along with several key Fed speakers this week also drove up dollar demand. 

Strength in the dollar weighed on most Asian currencies. The South Korean won weakened, with the pair rising 0.3%, while the Singapore dollar’s pair rose 0.1%.

The Indian rupee hovered near record lows hit last week, with the pair remaining well above the 83 level. 

The Australian dollar weakened, with the pair falling nearly 0.2% after data showed remained muted in February, giving more credence to a dovish outlook for the Reserve Bank of Australia.