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China fixes currency above 7 per US dollar and stronger than expected, seeking to stem slide
[SHANGHAI] China's tumbling yuan found a floor on Tuesday morning after a firmer than expected central bank fixing and a planned bond sale in the offshore market suggested authorities wanted to contain the currency's recent slide to new lows.
The yuan's 2.3 per cent decline over three days and breach of its 2008 low of 7-per-dollar roiled global stock, bond and currency markets as investors now worry the currency would become a new front in the long-running US-China trade war.
The slide followed President Donald Trump's sudden declaration last week of intent to impose 10 per cent tariffs on the remaining US$300 billion of Chinese imports from Sept 1, breaking a brief ceasefire in the bruising trade war.
But Tuesday's mid-point fixing by the People's Bank of China around which the yuan is allowed to trade, at 6.9683 per dollar, was firmer than markets expectations.
The PBOC's announcement of a sale of 30 billion yuan (S$5.88 billion) worth of yuan-denominated bills in Hong Kong also suggested the central bank was soaking up cash to prevent speculative short-selling.
The currency opened onshore trade at 7.0699 per dollar. Offshore yuan fell as far as 7.1397 before news of the sale of CNH bills caused it to firm 0.75 per cent.
"The PBOC is sending signals that it would like to mitigate RMB depreciation - by fixing dollar/yuan somewhat low, and by announcing to issue offshore bills," said Frances Cheung, a strategist at Westpac.
The stock market opened weaker, with the main Shanghai index down 1.75 per cent, taking its losses over 3 days to 5.5 per cent.
US Treasury Secretary Steven Mnuchin said on Monday the US government has determined that China is manipulating its currency and will engage with the International Monetary Fund to eliminate unfair competition from Beijing.
Chinese policy sources, however, told Reuters that the central bank had let the yuan slide past the key 7-per-dollar level so that markets could finally factor in concerns around the US-China trade war and weakening economic growth.