USD/CNY Around 6.165 after PBOC Rate Cut

China’s yuan fell to a two-year low, money-market rates dropped and most stocks advanced after the central bank cut benchmark borrowing costs for the second time in three months amid an economic slowdown.

The currency retreated as much as 0.06 percent in Shanghai and a gauge of interbank funding availability declined the most in more than a month. The benchmark Shanghai Composite index climbed, with about two stocks rising for each that fell. Most economists predict Premier Li Keqiang will announce a 2015 growth target of around 7 percent, down from 7.5 percent last year, when the National People’s Congress convenes its annual meeting this week.

“It’s pretty clear a rate cut is negative for the currency,” Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong, said in a March 1 phone interview. “Stimulating the economy has taken precedence over stabilizing the currency. They’ll allow more depreciation, and it makes sense because the dollar is so strong.”

Bloomberg

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