People’s Bank of China shores up yuan

Business | 11 Jun 2019 1:10 pm

China’s central bank moved to shore up the yuan with a stronger-than-expected fixing and a planned bond sale in Hong Kong, Bloomberg reports.

The People’s Bank of China set its reference rate at 6.8930 per dollar today, 0.2 perent higher than traders’ and analysts’ average forecast of 6.9089. The strong bias in the daily fix -- which restricts the onshore yuan’s moves by 2 percent on either side -- is the largest since Bloomberg started releasing the survey estimates in August 2017.

The central bank also said it plans to sell bills in Hong Kong later this month, a move that will drain liquidity and support the currency.

The yuan started to weaken in early May as a trade war with the U.S. escalated and the economy slowed. Bears got a new catalyst to build short bets on Friday, when the central bank’s chief Yi Gang hinted that China doesn’t have a red line for the yuan and it may further ease monetary policy. The exchange rate slid to the weakest this year ob Monday, sparking debate on whether or when China will allow it to break the key 7 level for the first time since the financial crisis.

US President Donald Trump and Xi Jinping may meet at the G-20 summit in Osaka this month. Traders will be closely watching the gathering to gauge the outlook for trade negotiations and the yuan.

The onshore yuan was heading for its first gain in five days, rising by 0.19 percent to 6.9175 per dollar as of 12:01 p.m. in Shanghai. The offshore yuan gained by 0.21 percent.

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