Combined, China and Japan hold more than one third of the total foreign holdings of U.S. Treasuries.
Following President Trump's tweets on May 3 which stated that the USA will increase tariffs on Chinese exports, USDCNH overnight implied volatility skyrocketed from 2.91 percent to 6.51 percent and exploded further to 10.95 percent by May 9 as market risk and uncertainty took footing. Chinese shares had modest losses. "It was done just in time, Monday morning for markets to open".
The yuan's advance came after a front-page article in a newspaper backed by the People's Bank of China cited analysts saying that the currency won't weaken continuously or by a large amount.
Foreign investors have accelerated the reduction of US debt securities, selling $21.7 billion of their holdings in March, according to data released on Wednesday by the US Treasury Department. Boeing dropped 4.9 per cent, Caterpillar Inc. fell 4.6 per cent and Apple Inc. lost 5.8 per cent. "That's positive - global growth and global trade shouldn't suffer too much - but we're likely to still be in a period where we are going to get headline volatility that relates to the compliance" after any deal, he said. The new penalties also took aim at American farmers, driving down soybean and cotton prices. Meanwhile, investors are pricing in a Federal Reserve interest-rate cut this year as a near certainty. Oil turned lower after rising earlier on concerns about rising tensions in the Persian Gulf.
Earnings this week include Vodafone, Alibaba, Tencent, Cisco, Nvidia. Kansas City Fed President Esther George and Richmond Fed President Thomas Barkin also make appearances.China industrial production and retail sales are slated for Wednesday, same day as USA retail sales and industrial production.Bank of Indonesia has an interest rate decision on Thursday.Australian unemployment is out on Thursday.
A statement published by China's Ministry of Finance on Monday said the increase would see 2,493 items hit with a 25 percent tariff, while 20 percent and 10 percent tariffs would apply to 1,078 and 974 items, respectively. The Bloomberg Dollar Spot Index rose 0.1%. Australia's 10-year bond yield fell about two basis points to 1.71%.
The West Texas Intermediate for June delivery was down 0.62 us dollar to settle at 61.04 dollars a barrel on the New York Mercantile Exchange, while Brent crude for July delivery fell 0.39 dollar to close at 70.23 dollars a barrel on the London ICE Futures Exchange.