Chinese central bank weakens its currency:
The negative interest rate by Japan on Friday has made the Chinese financial institution to weaken the renminbi.
Every morning the People’s Bank of China sets the “fix” for the currency – the daily midpoint reference rate around which its 2 per cent trading band against the dollar is set – 15 minutes before the mainland markets open.
This morning it was set at Rmb6.5539 per dollar, or 0.04 per cent weaker.
In the previous six sessions it had allowed it to strengthen – by an aggregate 0.2 per cent – the longest such streak since October 13.
In December the PBoC announced it would measure the renminbi against a trade-weighted basket of major currencies, including the yen, rather than just the US dollar. The yen has fallen almost 2 per cent since the BoJ’s announcement.
Action by the BoJ last week, and recent hints from the European Central Bank that it could loosen monetary policy again as early as March, have seen their respective currencies weaken. That should theoretically equate to some downward pressure on the renminbi, given the new setting mechanism versus a basket of currencies.
The PBoC’s moves to weaken the currency for eight consecutive sessions unsettled markets at the beginning of the year. However, since the middle of last month it has endeavoured to keep the renminbi more stable, amid fears of capital flight from China.