Yuan steady as China central bank halts decline, stocks swing
BEIJING — The yuan stabilised as China’s central bank strengthened its currency’s reference rate for the first time since Tuesday’s devaluation. Asian shares fluctuated, while US oil and industrial metals in London headed for their seventh straight weekly declines.
The yuan was little changed at 6.3993 per dollar in onshore trading by 10.18am in Hong Kong, after the People’s Bank of China set its reference rate at 6.3975, slightly stronger than yesterday’s closing price. China cut the rate around which its currency can trade by about 4.4 per cent this week.
The MSCI Asia Pacific Index headed for a fourth weekly drop and US index futures fluctuated. Oil fell 0.4 percent, while nickel headed for a 2.3 per cent loss since Aug 7. Malaysia’s ringgit plunged to the lowest since 1998.
China’s decision to move to a more market-oriented exchange-rate mechanism has rocked markets this week, triggering losses among developing-economy currencies and spurring a rush to havens such as bonds and the yen.
Panic calmed yesterday after the PBOC reiterated its commitment to supporting a strong and stable yuan. Reports on US consumer sentiment and producer prices are due after data showed retail sales expanding in July.
“Today’s fixing is in line with what they promised to do, which is to take account the previous day’s close,” said Dennis Tan, a currency strategist at Barclays Plc in Singapore. “It’s quite clear from yesterday’s PBOC press conference that it is not their main intention to depreciate the yuan sharply. They’re OK with a modest depreciation but they don’t want the depreciation to get out of hand.”
After being kept stable for four months, the onshore spot rate plunged about 3 percent this week. The freely traded offshore yuan advanced 0.6 per cent today, trimming its weekly loss to 3.4 percent. The People’s Bank of China’s fixing strengthened 0.05 percent, after slides of at least 1.1 percent in each of the last three days.
The yuan tumbled 1.8 per cent, the most in two decades, on the day of the devaluation and declines have since moderated as the PBOC intervened via agent banks and signalled its support for the currency. — Bloomberg
