China fixes yuan stronger vs dollar, reversing falls

The daily reference rate was set at 6.3975 yuan to $1.0, up from 6.4010 the previous day, the China Foreign Exchange Trade System said.


It was also lower than Wednesday’s close, and comes after China adopted a more market-oriented method of calculating the currency rate in a move widely seen as a devaluation.

In a bid to ease jittery global markets, China’s central bank said yesterday there was no basis for further depreciations in the yuan given the nation’s strong economic fundamentals.

The cuts have put financial markets on edge, sparking worries of a “currency war” as other countries feel pressure to devalue and raising questions about the health of the world’s second-largest economy, where growth is already slowing.

The Chinese central bank’s “opaque communications policy may well have led to panic over-selling earlier in the week”, market analyst Angus Nicholson of IG said in a commentary.

Japan’s Nikkei 225 rose 1 percent to 20,595.55 and South Korea’s Kospi gained 0.4 percent to 1,983.46.

China’s devaluation of its currency is designed to cushion it from strengthening along with the US dollar after a projected interest-rate rise from the US Federal Reserve, according to investment banking firm Goldman Sachs.

ADXY declined around 2% in last three trading session after China move devaluate the yuan and weakening economic momentum in the region have created a ideal storm for Asian currencies.

The bank can not intervene with this, but focuses more on improving the exchange rate formation mechanism, said Yi, who now serves as deputy governor of the PBOC and director of the State Administration of Foreign Exchange.

The tension is summed up in a great quote from PBoC Assistant Governor Zhang Xiaohui in a press conference: “Trust the market, fear the market, respect the market and follow the market”.

ENERGY: Benchmark U.S. crude fell further from a six-year low, down 18 cents at $42.04 per barrel in electronic trading on New York Mercantile Exchange.

In the previous two days, the central rate – around which the yuan is allowed to trade in a band of plus or minus 2 percent – had been marked 1.9 and 1.6 percent lower, respectively.

The Chinese Government had been lobbying the International Monetary Fund to include the yuan in its basket of reserve currencies known as the SDR (special drawing rights) group, which it used to lend to sovereign borrowers.

On Tuesday, China devalued the currency by the most in two decades to cushion its exports.


The yuan and the Chinese economy will eventually recover and get stronger as global financial markets become calmer.

US lawmakers quick to criticize China on currency drop