China Blinks First. Moves To Stabilize Currency

China set the yuan’s fix rate at 6.9683 against the US dollar on Tuesday morning. Photo: Bloomberg

SCMP: China’s central bank to sell US$4.3 billion worth of yuan-denominated securities, slowing currency devaluation

* Bill issuance in Hong Kong seen as most efficient way to absorb offshore liquidity and prevent further depreciation of yuan
* Traders need to defend worst-case scenarios, especially on the yuan as the bill issuance drains liquidity from offshore markets, analyst says

China’s central bank will sell 30 billion yuan (US$4.3 billion) worth of short-term yuan-denominated securities in Hong Kong next week, signalling its plan to absorb offshore liquidity and cushion against further depreciation of its currency versus the US dollar.

The People’s Bank of China (PBOC) unveiled the plan in a statement on its official website at 9am on Tuesday, saying the operation would commence with the issuance of central bank bills in Hong Kong on August 14.

“It is a clear message that the PBOC is preventing the yuan from sharp devaluation, and that China does not want to materialise the yuan as a weapon this early,” said Zhou Hao, an economist at Commerzbank AG in Singapore.

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WNU Editor: China blinked. The consequences of being labelled a currency manipulator by the largest economy in the world is not a path that China wants. It goes without saying that China is not happy .... Trump shrugs off trade war concerns; China warns of market chaos (Reuters).

More News On China Stabilizing Its Currency

China stabilizes currency but tensions with US remain high -- AP
Yuan gains as China appears to curb currency weakness -- CNBC/Reuters
China’s Central Bank Tells Foreign Firms Yuan Won’t Keep Falling -- Bloomberg
Oil price steadies as China stops currency slide -- Al Jazeera
Stock markets inch higher as currency war fears ease -- Reuters