BEIJING: The central parity rate of the yuan against the United States dollar strengthened by 196 basis points to 6.5118 on Monday, reversing drops in January, when the market was permeated by depreciation talk. “In addition, the rebound in global equity markets also lent support”, said Zhou Lin, analyst at Huatai Securities.
“The lack of central bank communication throughout the two bouts of weakening the currency in the last 6 months have been deafening so this at least shows some willingness to communicate on something that has been threatening to destabilise markets with the fear of a big devaluation hanging over the market”.
“The sharp drop of trade in January was a reflection of weak external demand”, ANZ analysts wrote in a note, citing weakness in trade partners Korea and Taiwan, although they added seasonal factors may have been an issue. China had expanded 6.9% in 2015, the slowest pace in 25 years as the nation strives to shift its focus to domestic consumption and away from exports.
The Ministry of Commerce said on Sunday that retailers and restaurants posted revenue of 754 billion yuan during the break, an 11.2 per cent increase compared last year’s holiday. However, imports fared worse, dropping 18.8 per cent and that left China with a record trade surplus of $US63.3 billion.
“In the near term, the stronger fixing and Mr Zhou’s comments reflect the PBOC’s consistent view of stabilising the yuan”, said Mr Ken Cheung, a Hong Kong-based strategist at Mizuho Bank. Imports fell sharply 14.4% year-on-year to 738 billion yuan in January, Customs said, a worsening of the 4.0% decline in yuan terms the month before.
In early January China guided the yuan – also known as the renminbi – down by setting its daily fix lower for eight consecutive sessions, representing a 1.4 percent fall, before it returned to stability.
In early afternoon on Monday the yuan was quoted at 6.4900 to US$1, up more than one per cent from the Feb 5 closing rate of 6.5695, data from the China Foreign Exchange Trade System showed.
To counter slowing growth, China’s policy makers have taken a slew of easing measures, including interest rate and reserve requirement ratio cuts from the central bank. A gauge of dollar strength declined 0.8 percent last week, while the yen climbed 3 percent and the euro advanced 0.9 percent.
