Yuan bond sale plan in HK puts offshore yuan on firmer footing

Business | 6 Aug 2019 11:44 am

China’s yuan found a floor today 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, Reuters reports.

The yuan’s 2.3 percent 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 U.S.-China trade war.

Today'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 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 to 7.1397 before news of the sale of offshore yuan bills caused it to firm 0.75 percent.

“The PBOC is sending signals that it would like to mitigate yuan depreciation – by fixing dollar/yuan somewhat low, and by announcing to issue offshore bills,” said Frances Cheung, a strategist at Westpac.

 

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