Yuan Halts Three Day Slide

The yuan halted a three-day slide after China’s central bank raised its reference rate for the first time since Tuesday’s devaluation and said it will intervene to prevent excessive swings.

The onshore spot rate was little changed at 6.4003 per dollar as of 12:56 p.m. in Shanghai, after falling 3 percent this week. The People’s Bank of China said Thursday there’s no basis for depreciation to persist and that it will step in to curb large fluctuations. It followed up with a 0.05 percent strengthening of its daily fixing on Friday, after three cuts of more than 1 percent each.

China’s first major devaluation since 1994 surprised global investors and fueled concern that authorities are struggling to combat a slowdown in the world’s second-largest economy. Policy makers are trying to balance the need for financial stability against a desire for stronger exports and the yuan’s inclusion in the International Monetary Fund’s basket of reserve currencies.

“The PBOC sent its signal and people understand it’ll be very difficult to go against the PBOC’s will,” said Ken Peng, a Hong Kong-based strategist at Citigroup Inc., the world’s biggest currency trader. “The central bank will frequently intervene in the foreign-exchange market in the next three months because it needs to ensure the yuan is stable.”

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell