China yesterday allowed the biggest fall in the yuan in five months, pressuring regional currencies and sending global stock markets tumbling as investors feared the Asian giant could trigger competitive devaluations from its peers.
China’s stock markets were suspended for the day less than half an hour after the open as a new circuit-breaking mechanism was tripped for the second time this week.
The People’s Bank of China (PBOC) again surprised markets by setting the official midpoint rate on the yuan 0.5 percent weaker at 6.5646 per US dollar, the lowest since March 2011.
Photo: Reuters / China Daily
That tracked record losses in the more open offshore market in the currency and was the biggest daily fall since August last year, when an abrupt near 2 percent devaluation of the currency also roiled markets.
However, dealers said the PBOC had intervened later to reverse a more than 1 percent fall in offshore rates for the yuan after they hit a record low of 6.7600 per US dollar.
After opening in London, the offshore yuan had taken back all its losses to stand higher on the day at 6.6905.
The PBOC’s China Foreign Exchange Trade System yesterday repeated that there was no basis for the yuan’s continuous depreciation and that it was stable against a basket of currencies last year.
However, the central bank’s fixings have helped drive the yuan down not just against the US dollar this week, but also other major currencies, including a 3.5 percent fall against the yen and 0.8 percent against the euro.
That raised concerns that China might be aiming for a competitive devaluation to help its struggling exporters.
Data yesterday showed China’s foreign-exchange reserves fell by the most on record last month, down US$108 billion, and by US $513 billion overall last year.
China’s securities regulator yesterday also unveiled new rules to restrict selling by big shareholders. In rules that take effect tomorrow, they cannot sell more than 1 percent of a listed company’s share capital every three months.
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