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Yuan Stabilizes as PBOC Acts to Calm Markets

7/4/2018, 2:34:41 PMBasics of Trading
Yuan Stabilizes as PBOC Acts to Calm Markets

The Chinese yuan stabilized against the dollar on Wednesday after touching its lowest levels in around 11 months overnight. Reports that the People’s Bank of China assured markets the central bank would keep the currency stable were cited as supporting the yuan.

Yi Gang, governor of the PBOC, said in a statement on Tuesday that the central bank would closely monitor fluctuation in the forex market and would take action to keep the yuan at a stable and reasonable level.  

The yuan tumbled in June and lost more than 3% against the greenback as concerns of a Sino-U.S. trade war haunted investors.

The USD/CNY pair was down 0.16% at 6.6316 by 12:15AM (04:15 GMT) on Tuesday, although traders are likely to remain on edge ahead of the July 6 deadline when the U.S. tariffs on $34 billion in Chinese goods are due to take effect. 

Many investors fear that the proposed plan to impose tariffs on more Chinese goods would further dampen global growth. Beijing has earlier said that it would match with tariffs on U.S. products, raising the risk of a full-blown trade war.

“It looks like national team buying," said Steven Leung, Uob Kay Hian (Hong Kong) Ltd. executive director in Hong Kong. “Also, the declines were too much, so there should be some bargain hunting."

The “national team”, as China’s state funds are called, have previously stepped in to stabilize the markets and lift sentiment during routs.

Concerns that a trade dispute with the U.S. would damage Chinese economy have erased $2 trillion from the value of Chinese stocks since a January peak.

Meanwhile, the U.S. Dollar Index, which tracks the greenback against a basket of six major currencies, stood at 94.28 on Wednesday, down 0.04%.