The People’s Bank of China reformed the exchange rate formation system on August 11 to better reflect market development in the exchange rate of the Chinese yuan against the U.S. dollar. Offshore traders also said that the surprise appreciation of the yuan in the past few days had also sparked stop-loss orders, which also boosted the yuan’s value. Traders in Shanghai said it appeared the central bank had been selling dollars via state banks. The spot market opened at 6.3725 per dollar and was changing hands at 6.3691 at midday, 0.08 percent firmer than the previous close. The professional ordered yuan in both Shanghai and Hong Kong via brokers of status money lenders on Friday, as per a couple accustomed to the…
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At that time, when investors cashed out of yuan bonds, they were given yuan. Yuan savings in Hong Kong probably shrank in August, according to the city’s association of banks. Banks scrambled for short-term cash to meet their needs, driving up interest rates.
The yuan devaluation confirms among those who would vote “no” that the rate is still subject to a high degree of intervention and the market mechanism is not driving the yuan, said Invesco’s Greenwood.
Last week, a preliminary measure of Chinese factory output in September hit its lowest point since the financial crisis, underscoring China’s vulnerability to global trade headwinds.
To help mitigate this, the nation has opened its interbank currency and bond markets to foreign central banks this year.
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Converging lending rates and a less predictable yuan currency regime has dampened enthusiasm for new Chinese offshore bond issuance, giving a newly accommodative mainland onshore market the chance to grab more deals in the fourth quarter.
