CHINA'S CENTRAL BANK SOOTHES NERVES OVER THIRD YUAN DEPRECIATION
Friday, August 14, 2015
Chinese authorities have lowered the fix point for the yuan trading range for a third straight day, but central bank market intervention has prevented another steep fall in the currency.
After what was originally described as a one-off move on Tuesday, where the fix point of the yuan was lowered by 1.9 per cent, Chinese authorities caught markets off-guard by dropping the yuan peg again on Wednesday, by a further 1.6 per cent.
Today's daily fix at 11:15am (AEST) cut the peg again by 1.1 per cent, however, the yuan actually strengthened slightly after market interventions by the Chinese central bank.
Analysts say state-owned Chinese banks intervened in currency markets last night by selling US dollars.
TD Securities Asia-Pacific economist Annette Beacher said those actions have calmed markets, and seen the Australian dollar hold relatively steady at 73.9 US cents despite today's latest depreciation.
"Late yesterday, when about 50 per cent of the depreciation was reversed via targeted state bank selling (of US dollars) headlines and a comment from the PBoC (People's Bank of China) offered soothing tones for the region," she wrote in a note.
"A calming of the markets here, with the mountains of research out there supporting the PBoC decision to depreciate a little against the US dollar, especially when 'everyone else' has depreciated by a lot more."
The soothing message was delivered by PBoC economist Ma Jun.
"There's no necessity for China to start currency wars with other countries to gain competitive advantage," Mr Ma said.
"In fact, if every country tries to devalue its currency, no one will benefit," he said.
The PBoC official also hinted that there would not be a lot more depreciation.
"China's current exchange rate is close to being balanced," he said.
"[The] PBoC is fully capable of directly intervening when necessary in the foreign exchange market to stabilise market rates, to prevent exchange rate fluctuations caused by irrational herd behaviour."
Get social with us and see the latest news items from:
