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Yesterday, the Chinese yuan suffered from one of its worst intraday declines since it was registered before the intervention of the central bank to stabilize the market.
Locally, the yuan fell 0.8% in parity with the US dollar in early operations, the fourth largest intraday decline, but by the end of the afternoon, losses were 0.3 percent, a move that traders attributed to the aggressive purchase of foreign currency by state-owned banks. The 3.3% drop in the Chinese currency in June is still the worst in a month.
Analysts said that, unlike earlier declines of the year, the yuan has not only fallen in recent weeks. with the dollar, but also against a more general basket of currencies that the central bank takes as a key reference.
"The weakness of the yuan based on the strength of the US dollar is presented as a less valid argument In the past two weeks, it has also weakened significantly compared to the weighted basket," said Tai Hui, Head of Asia-Pacific Market Strategy at JPMorgan Asset Management in Hong Kong. "This reflects the narrowing of interest rate spreads in US dollars and yuan," he said, noting that the recent monetary easing in China added to the downward pressure on the currency.
The impact of a trade war with the United States adds to the downward pressure that the currency suffered as a result of the slowdown of the national economy.
For its part, Chinese capital erased their first losses.The CSI 300 index, which tracks the major stocks operating in Shanghai and Shenzhen, fell 2.6%, but closed the day without change.The index is down 15% this year.
Market participants said that expectations of a declining trade surplus contributed to the rise of the yuan while the stock market posted a decline. Once tariffs have been granted or an agreement has been reached, China's trade surplus will decline, no matter how that will be resolved, "said a major foreign exchange trader. a Chinese bank in Shanghai. "Customers in the country buy wholesale dollars, and all the own portfolio operators of the overseas market banks are betting against the yuan."
In a press release posted on the website of Banco Popular Yesterday afternoon in China, Governor Yi Gang sought to reassure the markets and attributed the weakness of the yuan to the strength of the dollar and "a kind of cyclical behavior." He added that China's economic fundamentals are sound and that cross-border capital flows are balanced.
In a comment apparently aimed at factions within the government that are in favor of returning to dollar parity in previous years es, Yi said that China should "pursue" its policy of allowing supply and demand to serve as the "base" of the exchange rate, and that the basket of currencies function as a factor in the economy. ;adjustment.
Depreciation of the yuan in 2015-2016, policymakers were reluctant to bend to market forces, spending about a trillion dollars in hard currency for about 18 months to stem the decline.
In Hong Kong, the Hang Seng China Enterprises index, which tracks city-listed mainland companies, lost 1.9% to its lowest level since last August. The market was closed on Monday.
Chinese authorities moved yesterday to stabilize confidence, and state media urged investors to avoid panic sales of stocks and currencies. In the newspaper Securities Daily it was said in a commentary that stock market crashes were an "overreaction and irrational".
But some analysts said the market still had room to fall.
] "Amid the chorus calls for embarking on a" bottom fishing "(the process of investing in assets that have shown a decline either by their own or external factors), the Chinese market has significantly violated its uptrend in mid-2014, Hao Hong, head of research at Bocom International in Hong Kong, wrote on Tuesday:
"With more restrictions on property purchases to curb the housing bubble and liquidity … with a reduction, It is difficult to agree with the consensus that the market has reached its bottom possible. "
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