SHANGHAI – China’s central bank on Monday fixed its rate for the yuan currency at a four-week low, data showed, despite comments by the bank’s governor, Zhou Xiaochuan, that there was no basis for further depreciation.
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China lowered the RRR and interest rates five times previous year, the most aggressive easing of monetary policy since the 2008-09 global financial crisis.
China’s central bank has moved to further loosen monetary policy, saying on Monday night it would lower the amount of capital that banks must set aside.
India’s benchmark S&P BSE Sensex fell as low as 2.8 per cent during the day’s trade, but later pared some of its losses to end 0.7 per cent lower at 23002.
Month-to-date, the benchmark index gained 1.1%, while yuan rose 0.6% against the dollar.
Some investors were also disappointed after a Group of 20 meeting of finance ministers over the weekend failed to yield concrete measures to stabilize global markets and fuel growth.
REUTERS/Shannon StapletonThe stock market is over China. The Nasdaq composite fell less than a point to 4,590.
The last several months, however, have conditioned investors to sell stocks as China sells off with vague worries about economic growth in China and potential risks posed by their banking system serving as supposed reasons to sell U.S. stocks.
The bank’s guidance for it on Monday morning was the fifth in a string of weaker fixings and was in line with Beijing’s pledge a year ago to let the yuan move according to a basket of worldwide currencies, rather than just the U.S. dollar, according to analysts.
“The issue of a weaker yuan is back on the table again”, said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “It could get problematic because fixing against a stronger dollar makes the yuan stronger against the currency basket, and that will undermine China’s export competitiveness in Asia”. He spoke less than two hours before the central bank cut lenders’ reserve requirements, sparking a rally in China’s offshore equity-index futures. The move marks a return to more traditional easing after the central bank indicated it would spur growth by guiding interbank markets lower and injecting liquidity through open- market operations.
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“There was a real need for that communication because private conversations weren’t penetrating the consciousness of the many observers who wanted to know what China was trying to accomplish”, US Treasury Secretary Jacob Lew said.
