By recent standards was a quiet session for Chinese markets on Tuesday, although, amidst the relative calm, there were some crazy movements yet again in the Chinese renminbi.
Helping to boost sentiment at the start of trade, the PBOC fixed the USD/CNY rate at 6.5628, fractionally weaker than the 6.5626 level of Monday but below the last traded price of 6.5695 seen on Tuesday.
A higher figure indicates that the renminbi has weakened against the US dollar, and vice versus.
After initially weakening on the news, hitting a session high of 6.6073 shortly after the fix was announced, offshore traded yuan, or USD/CNH, reversed course and started to strengthen, eventually hitting parity with its onshore counterpart, the USD/CNY, for the first time since October 2015 midway through the session.
As at 6pm AEDT, USD/CNH was buying 6.5865, slightly above USD/CNY at 6.5737.
Suspected intervention from the PBOC, through China’s network of state-owned banks, was cited as the catalyst behind the sudden strengthening.
As the chart below reveals, the cost of borrowing offshore yuan soared on Tuesday with overnight HIBOR fixing at 66.8%, the highest level on record.
This indicates that the offshore yuan liquidity was all but nonexistent, helping to underpin the currency after the accelerated sell off seen last week.
The daily chart below demonstrates the rapid reversal in offshore traded yuan seen in recent sessions. Thanks to the suspected PBOC intervention, many investors shorting the yuan will no doubt think twice before betting on further weakness.
As opposed to the events in currency markets, Chinese stocks endured a largely uneventful session, finishing with modest gains.
At the close the benchmark Shanghai Composite index added 0.38%, recovering a fraction of the 5.3% plunge seen on Monday.
Despite the relative calm in Chinese markets, it wasn’t enough to bolster risk assets across the broader Asian region with stocks, commodities and higher-yielding currencies remaining under pressure.
Here’s the Asia scoreboard as at 6pm AEDT.
- ASX 200 4925.13 , -7.11 , -0.14%
- Nikkei 225 17218.96 , -479.00 , -2.71%
- Shanghai Composite 3023.19 , 6.48 , 0.21%
- Hang Seng 19717.65 , -170.85 , -0.86%
- KOSPI 1890.86 , -3.98 , -0.21%
- Straits Times 2693.67 , -15.18 , -0.56%
- S&P 500 Futures 1902.00 , -12.25 , -0.64%
- USD/JPY 117.36 , -0.39 , -0.33%
- USD/CNY 6.5752 , 0.0077 , 0.12%
- AUD/USD 0.6963 , -0.0030 , -0.43%
- NZD/USD 0.6547 , -0.0007 , -0.11%
- AUD/JPY 81.72 , -0.58 , -0.70%
- EUR/USD 1.0881 , 0.0022 , 0.20%
- GBP/USD 1.4526 , -0.0012 , -0.08%
- USD INDEX 98.675 , -0.0500 , -0.05%
- Gold $1,094.10 , $0.24 , 0.02%
- Silver $13.82 , -$0.03 , -0.25%
- WTI Futures $30.58 , -$0.83 , -2.64%
- Copper Futures ¥34,990 , -¥520 -1.46%
- Iron Ore Futures ¥300.00 , -¥8.50 , -2.76%
10-Year Bond Yields
- Australia 2.787%
- New Zealand 3.400%
- Japan 0.211%
- Germany 0.542%
- UK 1.773%
- US 2.160%