Tue, Sep 22, 2015 - Page 15 News List

Yuan falls most in two weeks

INCORRECT PERCEPTIONS:China’s economy is not as weak as it might look and ‘no collapse is nigh’ in the aftermath of the stock-market plunge, CBB International said


The yuan dropped the most in almost two weeks as the Chinese central bank lowered the currency’s daily reference rate and Federal Reserve officials indicated that US interest rates would be raised this year.

The People’s Bank of China cut the yuan’s fixing by 0.11 percent, the most since Sept. 10, to 6.3676 per US dollar. That was after the greenback rallied the most since July 1 on Friday last week.

Three US policymakers, including San Francisco Federal Reserve President John Williams, argued over the weekend that an increase in borrowing costs is still warranted at one of the central bank’s two remaining meetings of the year.

US stocks tumbled on Friday last week as the Fed Reserve’s decision not to tighten spurred concern about the global economic outlook.

“The yuan is being pressured by a stronger dollar and weaker sentiment from Western equity markets,” said Eddie Cheung, a foreign-exchange strategist at Standard Chartered PLC in Hong Kong.

“In the short term, the yuan will remain stable due to President Xi Jinping’s (習近平) US trip, the International Monetary Fund’s [IMF] decision on the reserve currency basket and China’s goal of closing the gap between the onshore and offshore rates,” he said.

The onshore yuan, which is allowed to diverge from the central bank’s fixing by a maximum 2 percent, fell 0.07 percent to 6.3687 a dollar in Shanghai, China Foreign Exchange Trade System prices showed.

That was the currency’s biggest decline since Sept. 9.

The freely traded offshore yuan dropped 0.19 percent to 6.3991 in Hong Kong, according to data compiled by Bloomberg.

The yuan should be more flexible and the Chinese government has no intention of pegging the currency to the US dollar in the long term, Jin Zhongxia (金中夏), China’s representative to the IMF, said in Washington on Friday last week.

The nation has adopted a series of measures to satisfy the IMF’s requirements to include the yuan in its Special Drawing Rights, Jin said.

Xi is visiting the US from today until Friday.

Asia’s largest economy is not as weak as it might look and “no collapse is nigh” in the aftermath of the stock-market plunge and currency devaluation, according to the third-quarter China Beige Book, published by New York-based CBB International.

“Perceptions of China may be more thoroughly divorced from facts on the ground than at any time in our nearly five years of surveying the economy,” CBB president Leland Miller wrote in the report.

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