The Chinese yuan pulled back against the US dollar even as equity markets moved higher on the day. Attributed to the massive support seemed to be strength against other major pairs in the currency market, namely the British pound and Euro. As a result, against the US dollar, the yuan traded back to as much as 7.5815 in the overnight session while the Chinese currency remained ahead of both the Euro and the Pound sterling. As mentioned, the move countered gains in stock prices as the benchmark index hit another all time record during the session. Paced by advances in shares of Citic Securities Co. the benchmark CSI 300 index added 74.38 points, the index closed higher at 4,795.57, up 1.6 percent. It seems that speculation is bent on higher earnings once again as Citic is expected to show net income that jumped 550 percent in the first half of the year after the market’s close. As a result, expectations helped to boost the overall sector as well as interests in Youngor Group Co. The maker of men’s clothing saw shares rise after stating that first half profit surged on higher retail spending.

China Retail Sales Rises To Historic Pace
Growing at the fastest pace since 2004, China’s retail sales survey jumped 16.4 percent in the month of July. Spending in the economy grew at a 699.8 billion yuan pace compared to a year earlier, according to the National Bureau of Statistics, and lends to speculation of mounting inflationary pressures in the world’s fastest growing economy. Attributed to the rise in spending is the rapid growth in incomes, to the tune of 14 percent, coupled with stock market gains offering individuals with more disposable income. Subsequently, consumer confidence in the economy is expected to rise to the highest level in almost 4 years for the second half of the year with robust growth continuing to support spending on the consumer level.

US Requests Ruling On Chinese Piracy
In an aggressive move, the Bush administration requested that the WTO rule on a current complaint against China over the topic of pirated movies, music, software and books. More specifically, the US Trade Representative’s office took formal steps in asking arbiters to deem current Chinese laws too laxed in safeguarding current copyrights of American products. Although rightfully placed, the request will likely fall to the wayside, buying officials more time as Chinese leaders will be able to block the formal request. Subsequently, this would force the US to make an additional request for the establishment of a panel in September. Typically, rulings after that will take up to a year or more to finalize.

With Stable Outlook, Singapore Keeps Fitch’s Top Rating
Sharing the highest investment grade ranking with nations in the G8 industrialized group, Singapore maintained a top AAA credit ranking at Fitch Ratings agency. Attributed to a supported financial position in the global market, the agency noted that the outlook remains stable for the Asian economy. “Together with the country’s strengthening external financial position and sound fiscal position in our forecast horizon, we view that Singapore’s strong creditworthiness is well supported”, stated Vincent Ho, associate director of Fitch’s Asia Sovereign Ratings group.

Terri Belkas is a Currency Strategist at FXCM.