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Jobless Data Reflects Strong Labor Market, Stocks Up On Yuan Peg

Job fair. Screenshot: YouTube

After a chaotic three days to begin the week, markets were soothed by several factors indicating increased stability domestically and abroad. Equity benchmarks gained in early trading, with the NASDAQ and S&P 500 up over 1%, and the DJIA up by 0.6%.

Jobless Data

The Labor Department’s first batch of state unemployment data showed a decrease of 8,000 initial claims last week. The prior week’s reading was revised up by 2,000 applications. The four-week moving average inched up slightly, but the reading of 209,000 claims versus forecasts in the 215,000 range was a stabilizing influence on early trading gains.

Chinese Currency Fixing…And How They Do It

In a move that reassured global markets, China fixed its onshore currency, the CNY, at a firmer level than expected, indicating a desire to stabilize the currency.

In light of U.S. accusations regarding Chinese currency manipulation, here’s a brief look at how China fixes their currency: the People’s bank of China (PBoC) pegs the CNY to a non-disclosed basket of currencies on a daily basis, and has total discretion on as to how they fix the currency based on “counter-cyclical factors,” or CCF, a model introduced by the State Administration of Foreign Exchange (SAFE) in May of 2017.

Read more about it here. The bottom line is that the CCF enables the PBoC to dial the currency up or down. Today, for instance, the PBoC set the CNY fix at 7.0039, the first time it has been above 7.00 since May 15, 2008. This higher-than-expected setting sent the message to global markets that the PBoC had stopped the currency’s slide.


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