Yuan opens firmer after central bank guides rate higher despite easing move

[SHANGHAI] China's yuan firmed at the open on Tuesday, after the People's Bank of China (PBOC) cut banks' reserve requirement ratio by 50 basis points, injecting around 650 billion yuan (S$139.42 billion) into the economy.

The People's Bank of China set the midpoint rate at 6.5385 per US dollar prior to market open, firmer than the previous fix of 6.5452, and higher than Monday's closing quote at 6.554.

The spot market opened at 6.5432 per US dollar and was changing hands at 6.5440 in early trade, -100 pips away from the previous close and 0.08 per cent away from the midpoint.

The spot rate is currently allowed to trade with a range 2 per cent above or below the official fixing on any given day.

The offshore yuan (CNH) was trading -0.08 per cent away from the onshore spot at 6.5492 per US dollar, firmer than the previous day's unofficial close of 6.5518.

Increased money supply will typically put downward pressure on a country's currency, but the PBOC has been taking a slew of measures to cushion the impact of its easing steps on the yuan since early January.

REUTERS