The People’s Bank of China (or PBoC) again surprised the market on January 7 by setting the official midpoint rate on the yuan, also known as the renminbi, at 6.6 per dollar, the lowest since March 2011.
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Exports in December fell 1.4% from a year earlier, data from the General Administration of Customs showed. It plunged 9.23 percent over the week. Neither EconoTimes nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon.
Japan’s Nikkei index jumped 2.6 percent and Europe’s main markets gained after China reported exports dipped just 1.4 percent in us dollar terms in December, compared to forecasts of an 8-percent drop.
“China’s improved trade data in December will probably act to reassure global investors unnerved by the recent volatility in the country’s financial and foreign-exchange markets”, said Tom Rafferty of the Economist Intelligence Unit in a report.
As demand dwindles, commodity prices fall in response.
In Hong Kong, the Hang Seng index dropped 1.6 percent to 19,608.96 points, its lowest since June, 2013. Chinese banks issued 597.8 billion yuan ($5.1 billion) of new loans in December, down from 708.9 billion yuan ($6.04 billion) in November.
Bhanu Baweja, a UBS (NYSEArca: FBGX – news) strategist, said that markets “should expect future episodes of yuan weakness”, given China’s relatively new currency regime.
But dealers said the yuan would resume its decline if the central bank loosened its grip, and more than 30 major market players in Europe and the United States told Reuters they would not rule out a further 15 percent depreciation this year.
China’s December exports and imports both came in stronger than expected, resulting in a larger-than-expected trade surplus of US$60 billion. The yield on debt due October 2025 fell as much as three basis points to 2.70 per cent, the least for a benchmark 10-year note in ChinaBond data going back to September 2007. While the factors that have driven prices almost 18 per cent lower this year are a concern, and are hurting exporters and energy company shares, lower oil and gas costs are a boon for many resource-scarce Asian economies.
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The central bank has also used aggressive intervention to engineer a huge leap in yuan borrowing rates in Hong Kong, essentially making it prohibitively expensive to short the currency.
