- Chinese officials to add more dovish policy measures to spur economic growth
- Risk appetite seemed to be unaffected by the release of China’s intended actions
- NZD/USD and AUD/USD rally likely due to Fed rate decision market digestion
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Chinese officials stated that the government is set to implement accommodative policy measures to support economic growth after the country’s Central Economic Work Conference concluded. Some of the actions include the following:
- Gradually widening the fiscal deficit by reducing taxes
- Supporting the housing market recovery, which may mean increasing access to credit
- Putting a floor on economic growth (figure will not be disclosed until a legislature vote in March)
Although this set of forthcoming policies may spur growth in the world’s second largest economy, it did not create follow-through for risk appetite. New Zealand and Australian front-end bond yields did not show a substantial move on the announcement. The news was released when China’s Shanghai stock market was closed. Chinese equities such as the Shanghai Comp and CSI 300 gapped higher after market open. They failed to hold gains and soon reversed. The Kiwi and Aussie Dollar rally was likely due to other reasons. Currency Strategist Ilya Spivak discussed AUD/USD and NZD/USD gains being a result of investors seeking higher-yielding alternatives.
See our Chinese Yuan weekly forecast HERE.