Fall in exports hits yuan and money market
Print Edition
China’s yuan and money market rates fell yesterday after exports shrank last month, indicating the central bank may take measures to support trade and curb interest arbitrage.
The seven-day bond repurchase rate, the benchmark money rate that measures liquidity in the banking system, opened at its lowest level since April 2008 at 2.2 percent yesterday. It shed 12 basis points from the previous trading day and closed at 2.3 percent.
Meanwhile, the yuan yesterday dipped 0.2 percent from the previous trading day after the People’s Bank of China set the central parity rate at 6.1312 yuan per US dollar, the weakest since December 3. The yuan can trade up to 1 percent on either side of the daily fixing.
China said exports fell 18.1 percent in February while industrial output in the world’s second-biggest economy slowed.
“The yuan faces downward pressure,” Guotai Junan Securities said in a report. “Market hopes for a periodic devaluation are rising. The central bank may compromise by keeping the yuan weak, coupled with easing liquidity conditions, to stabilize the market.”
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