China central bank suspected to have intervened to support yuan: traders

The People’s Bank of China cut the yuan’s fixed rate by 96 basis points against the USA dollar, making it weaker than 6.5 for the first time in more than four-and-a-half years.

Onshore, the yuan hit its lowest since April 2011, at 6.5140.

China Foreign Exchange Trade System also introduced a new index to gauge the renminbi’s value against a basket of 13 currencies.

The Shanghai Composite Index plunged 7 percent on Monday prompting stock markets in Shanghai and Shenzhen to halt trading for the remainder of the day.

The offshore yuan was trading 1.42 percent weaker than onshore spot at 6.6213, edging near a five-year low touched last week. The S&P 500 lost 1.5% and the Nasdaq dropped 2.1%.

Markets continued to swing on Tuesday, and the Shanghai Composite ended with a 0.3 percent loss.

Furthermore, several large Chinese companies said their major shareholders and senior executives would voluntarily extend a ban on sales of shares in the secondary market, Reuters reported.

Chinese manufacturing surveys showed that any hopes for a recovery in the sector were premature, with factory activity contracting for a 10th straight month in December and at a faster pace than in the previous month.

“China’s actions are certainly positive at the margin… but overall the risk is that it is interpreted as a signal of weakness that these ongoing struggles to stabilize the market by the authorities aren’t really bearing fruit”, Commerzbank strategist, Michael Leister, said.

Elsewhere in Asia, Japan’s Nikkei 225 tumbled 3.1% and Hong Kong’s Hang Seng retreated 2.7%.

The reverse repo has been priced to yield 2.25 percent, unchanged from the yield of a net injection last week of ten billion yuan, using reverse repos.

Oil prices were in the red, with Brent down 1.3% to 36.73% a barrel and West Texas Intermediate down 1.07% to $36.37 a barrel at 1425 GMT. Other emerging currencies including the Indonesian rupiah and the Russian rouble slumped between 0.4-0.8 percent. Low crude prices may prop up the excess to about $360 billion this year, a level last seen before the global financial crisis, Goldman analysts led by Robin Brooks wrote in a report on Tuesday.