Asia: Liquidity, liquidity, everywhere – Deutsche Bank

By FXStreet FXStreet (Delhi) – Research Team at Deutsche Bank, suggests that globally the taps are being turned on again and with risk failing to bounce on its own, the central banks are stepping back in.

Key Quotes

“The most notable one is of course China, which has net injected upwards of $200bn of RMB liquidity into its local markets in the last few days through a combination of short and medium term liquidity operations. To be sure, this is most immediately targeted towards ensuring against a funding squeeze around Chinese New Year. But in that it has also used medium term lending facilities, the PBoC is clearly looking to sterilize more definitively the pickup in capital outflows from over the past couple of months.

We are of the view that combining these liquidity operations with RRR cuts would be the most effective way to stabilize funding costs in the local bond markets. We expect an additional $60bn equivalent of medium term RMB liquidity injection over the next couple of weeks to stabilize the liquidity condition.

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Source:: FX Street