The People’s Bank of China said late on Friday said it was lowering the one-year benchmark bank lending rate by 25 basis points to 4.35% from Saturday.
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China’s economic growth dipped to 6.9% in the third quarter of this year after recording 7% rises in the first two quarters of 2015.
With economic growth in the world’s second largest economy falling to a six-year low…
“China’s cut to interest rates may stimulate activity in China and push their growth rate in an upward direction and this has really buoyed market sentiment”.
The USA dollar was last down 0.3% against the Japanese yen at Yen121.14.
The central bank has intervened repeatedly onshore and offshore to keep the yuan stable and discourage capital flight, even as it positions the currency for potential inclusion in the worldwide Monetary Fund’s currency basket. Yuan was trading below the midpoint rate of 6.3549 set by PBOC in early morning trade on Monday.
Before that, the benchmark deposit rate was 1.75 percent, and commercial banks were allowed to set their own one-year deposit rates as high as 2.625 percent, or 50 percent above the benchmark.
TOKYO – Asian stocks on Monday were close to wiping out all their losses since China’s shock currency devaluation in August, as global equities rallied after the Chinese central bank cut rates and U.S. tech giants provided upbeat earnings guidance.
While the shift in China’s momentum is expected to help economies in Asia, especially India which is trying to boost exports through the “Make in India” campaign to take China’s place as a global exporter, the drastic slowdown has raised fears over the health of global economy.
“While central bank actions across the G10 have typically been viewed in a “bad-news-is-good” framework, the easing from the PBoC in China late on Friday was seen as a foreboding sign for global growth”.
High-risk currencies receded against the USA dollar as investors’ unease over the Chinese economy trumped expectations for US interest rates to stay at record lows into 2016.
The South Korean won shed 0.80%, Indonesia’s rupiah eased 0.28%, and the Malaysian ringgit was 0.32% lower.
In Japan, the Nikkei was up 0.85% after touching two-month highs on optimism that the Bank of Japan might follow the PBOC’s lead and suggestions from the European Central Bank that it could embark on another round of monetary easing.
BlueScope Steel Ltd soared 11 percent in Sydney after Australia’s largest steelmaker agreed to buy the remaining 50 percent of its joint venture in the United States with Cargill Inc for US$720 million, giving the producer full ownership of North America’s most profitable mill.
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As negative yields undermine the attraction of holding the euro, traders pushed it to a 2 1/2-month low of $1.0989 in early Asian trade.
