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.
The move by the People’s Bank of China serves to highlight the increasing level of concern awarded to the world’s second-largest economy.
Another senior PBOC official, Yi Gang, dismissed media reports that Chinese authorities had demanded a 10-percent depreciation in the yuan by the end of the year in hopes of rescuing the country’s slipping exports, describing such reports as “completely baseless”.
The People’s Bank of China on Tuesday devalued its currency by 1.9% to prop up the country’s exports, which constitute 30% of its GDP.
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. In commodities trading, crude oil futures extended sharp losses that pushed oil prices to levels not seen since early 2009, when the financial crisis was wreaking havoc on markets. China’s main stock index has held remarkably steady this month, amid government buying of stocks to stabilize the market.
Beijing’s change in currency exchange policy brought criticism from several members of the U.S. Congress who say it continues a practice that gives Chinese exporters an unfair advantage, and hurts American jobs. The US and Europe also fear a further lowering of the yuan value by the Chinese government. Japan’s Nikkei 225 rose 1 percent to 20,595.55 and South Korea’s Kospi gained 0.4 percent to 1,983.46.
There’s little reason to believe that this week’s currency devaluation will slow China’s investment around the world, which just topped $1 trillion over the last decade, according to data collected by the American Enterprise Institute.
“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”.
In China, the Shanghai Composite rose 0.3% to 3,965.34 late in the session, while Hong Kong’s Hang Seng edged down 0.2% to 23,982.55. Beijing “is obsessed with the idea” of the yuan becoming one of the worldwide Monetary Fund’s (IMF) reserve currencies, along with the euro, the yen, and the dollar.
U.S. crude rose to a new 6 1/2-year low of $41.35 a barrel, as a big increase in U.S. stockpiles intensified worries over a growing global glut.
China targets this year’s economic growth rate at 7 percent, marking the slowest expansion in 25 years.