Ruble rebounds on China swap speculation

The Santa Clause rally is rolling on in global equities with sentiment remaining positive as the S&P marches towards its record high yet again.

Source: Bloomberg

The S&P closed at a record 2077 and is within a couple of points of its December 5 intraday record high of 2079. The bounce in crude oil prices seems to have been a flash in the pan with investors finally realising that comments by OPEC members from the weekend did not imply they will look to correct the current supply situation. In fact, Saudi Arabia seems unfazed by the price slump and continues to focus on market share. The story that gathered momentum in the macroeconomic space suggested China could be looking to expand a pre-existing currency swap between the People’s Bank of China and the Russian central bank. Russia is hoping this will help stem the slide in the ruble, while China hopes this will increase the acceptance of the yuan. While the reports are unconfirmed, this was still enough to see a rebound in the ruble. The current arrangement is a 150 billion yuan three year currency swap. The PBoC has also just signed a 70 billion yuan currency swap three year agreement with Thailand.

USD rallies against majors

Markets will start winding down today as we head into the Christmas break but this does not necessarily mean the gains will stop. Meanwhile, the greenback has just continued to nudge higher against the majors and this has seen EUR/USD and AUD/USD test key support levels early in Asia. EUR/USD is just hanging onto $1.222 as traders found the ECB’s announcement of ABS and covered-bond purchases somewhat underwhelming (EUR1.49 billion). Some analysts have been speculating the ECB is struggling to ramp this up. Additionally today will be Greece’s second attempt to elect the nominated president. Another failed attempt is likely to see investor nervousness rise and could weigh on the euro. AUD/USD looks like it is headed back to retest the $0.8100 handle. USD/JPY is back above 120 and this would have underpinned the Nikkei if it was trading today. Japan is closed in observance of the Emperor’s birthday.

ASX 200 could see profit taking

Ahead of the open we are calling the ASX 200 up 0.2% at 54440. Today will be a bit trickier given we are seeing a bit of pessimism in the key commodities that have led the recovery in recent days. Iron ore, gold and crude oil all lost some ground and this will weigh on some of the materials and energy names. It’ll also be interesting to see if the banks can maintain their run after some hefty gains yesterday. CBA will be of particular interest after it rallied to a fresh record high yesterday. Kathmandu’s huge slide after a profit warning yesterday will also be in focus. Brokers are likely to start downgrading the stock in response to the trading update.

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