China weakens yuan for third day, reassures markets

August 13, 2015 7:34 am
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The cut was less than previous two days and came after reports the People's Bank of China (PBoC) intervened Wednesday to stem the yuan's fall/AFP
The cut was less than previous two days and came after reports the People’s Bank of China (PBoC) intervened Wednesday to stem the yuan’s fall/AFP
SHANGHAI, China, Aug 13 – China weakened its currency for the third consecutive day Thursday, but financial markets that had been shaken by the surprise devaluation took heart as authorities pledged not to let the yuan plummet.

The central bank trimmed the reference rate for the yuan – also known as the renminbi (RMB) – by 1.11 percent to 6.4010 yuan for $1, the China Foreign Exchange Trade System said, from the previous day’s 6.3306.

The cut was less than previous two days and came after reports the People’s Bank of China (PBoC) intervened Wednesday to stem the yuan’s fall.

China adopted a more market-oriented method of calculating the currency rate this week in a move widely seen as a devaluation, raising fresh questions about the health of the world’s second-largest economy.

After global stock and currency markets staggered in response, the PBoC went on the offensive Thursday, telling reporters that the yuan was still a strong currency and that Beijing would keep the unit stable.

“Currently, there is no basis for the renminbi exchange rate to continue to depreciate,” assistant governor Zhang Xiaohui told a briefing, according to a transcript.

“The central bank has the ability to keep the renminbi basically stable at a reasonable and balanced level,” she said.

The comments drove a relief rally Thursday in Asian shares and Asia-Pacific currencies, which suffered their biggest two-day selloff since 1998 this week, although analysts said sentiment remained fragile.

“It’s likely the worst is over,” Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong, told Bloomberg News.

“PBoC intervention has calmed the market. There is not a sense that the onshore yuan will weaken forever.”

The yuan was quoted at 6.4067 to the dollar at midday, down from the previous day’s close of 6.3870.

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