Friday 23 February 2018

China's yuan strengthens after three day fall

A man walks past yuan signs at a currency exchange in Hong Kong. REUTERS/Tyrone Siu
A man walks past yuan signs at a currency exchange in Hong Kong. REUTERS/Tyrone Siu newsdesk

Asian stock markets stabilised this morning with some even strengthening after the surprise devaluation of China's yuan was halted.

The country's Central Bank raised the value of the yuan by 0.005pc against the dollar.

This ended three days of falls for the currency since its surprise devaluation was first announced.

The daily reference rate was set at 6.3975 yuan to $1.0, up from 6.4010 the day before, the China Foreign Exchange Trade System said. That was also slightly stronger than Thursday’s close of 6.3982 yuan.

The Shanghai Composite Index rose 0.8pc and the Hang Seng Index was up 0.1pc.

The move came after China's central bank reassured investors yesterday there was no reason for its currency to keep falling,

China's decision to devalue the currency on Tuesday by pushing its official guidance rate down 2pc sparked fears of a "currency war" and roiled global financial markets, dragging other Asian currencies to multi-year lows.

It also drew accusations from U.S. politicians that Beijing was unfairly supporting its exporters.

The People's Bank of China said at the time that the move was a one-off depreciation.

Tuesday's devaluation followed a run of weak economic data and resulted in the biggest one-day fall in the yuan since 1994, raising market suspicions that China was embarking on a longer-term depreciation of its exchange rate that would make Chinese exports cheaper.

Data on Chinese factory activity growth and retail sales on Wednesday underlined sluggish growth in the world's second-largest economy, while fiscal expenditures jumped 24.1 percent in July, reflecting Beijing's efforts to stimulate economic activity.

Weighed down by weak exports, sluggish domestic demand and a cooling property market, growth in the world's second-largest economy is expected to slow from 7.4 percent in 2014 to 7 percent this year, its slowest pace in a quarter of a century.

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