The bank described such reports as “completely baseless” as China’s export surplus is very big.
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The bank had on Tuesday announced it would start setting the daily rate based partly on the previous day’s trading, bringing the yuan closer to a free-floating currency. Rumours that Beijing was seeking a 10 per cent devaluation of the yuan were described as “sheer nonsense” and “totally unfounded” by deputy governor Yi Gang.
The central bank has yet to confirm the supportive action, but it is broadly being treated as fact by market insiders. “All the domestic and foreign financial institutions are competing fairly, and the game rules are transparent”.
“This level appears to be where the PBOC wants to keep the yuan stable for today, possibly in the near term”, said a trader at a foreign bank in Shanghai.
“We agree with the central bank that the one-off adjustment seems to be nearing completion”, HSBC said.
Brazil figured out that “a manufacturing and export driven economy is not sustainable in the long run”.
The dollar’s strength together with loss Japanese monetary policy has meant that since mid-2012 the yuan is 60% stronger than the Japanese yen, the currency of a country which which it competes fiercely for exports.
Asian stock markets stabilized Thursday as the fall in the Chinese yuan slowed and the country’s central bank tried to dampen speculation of further devaluation.
On Tuesday, the PBOC cut the yuan’s reference rate against the U.S. dollar by nearly 1.9 percent, catching the global financial markets off guard and sparking a currency depreciation competition in the region.
Despite the renewed calm in markets, the yuan weakened for a third day and some forecast further declines in the face of a weak economy, Reuters reported.
But he added that the PBoC would implement “effective management” of the exchange rate in case of external shocks or extreme currency volatility.
HSBC said in a note yesterday that it did not believe China was adopting a yuan devaluation strategy and said the change in the yuan fixing mechanism would not alter plans to internationalize the currency.
Chemical and resins manufacturer Nuplex was up 1.7 percent after reporting a solid lift in its full year profit, raising its dividend, and stating it expected to see modest growth in the coming year. This is the whole reason behind the effort of the eurozone to create a strong political as well as currency union – so that it can play at the highest levels in worldwide markets.
There are now around 4 million households in China that have private wealth of at least $1 million according to Boston Group Consulting, and private bankers say last month’s stock market turmoil had already prompted them to make more investments overseas.
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That could spark a currency war in the region.
