China central bank injects $20B to ease investors

The yuan has largely been trending down since the People’s Bank of China (PBOC), the central bank, revamped its foreign exchange mechanism last August to make the currency more market-based.

New yuan funds outstanding for foreign exchange refers to the amount of yuan Chinese banks put into the domestic market when they acquire foreign currencies from individuals or companies.

China’s central bank said on Monday it had extended 100 billion yuan ($15.3 billion) in loans to 13 financial institutions under a medium-term lending facility (MLF) in December. Still, the yuan’s closing rates will be the level at which it is quoted at 4.30p, at around 6.519 yesterday.

In a rare move, the country’s securities regulator released statements before the stock market opened Tuesday, seeking to alleviate concerns about an expected increase in the supply of shares as well as newly launched index trading limits known as circuit breakers. That’s 1.9 percent weaker than the onshore exchange rate, which declined 0.33 percent to 6.5374.

The People Bank of China set today’s central parity rate for yuan at 6.5314 per dollar, compared to Tuesday’s reference rate of 6.5169.

The onshore yuan was trading against the euro at 7.1369, 0.6 per cent weaker than the previous close.

The Chinese yuan plunged to a five-year low in offshore trading and the gap between it and its mainland counterpart widened sharply on Wednesday, reflecting growing expectations of further weakness in the currency as China’s economy slows and capital outflows accelerate amid a stock slump. It traded 1.71 percent weaker than the onshore spot at 6.6335 per dollar near midday.

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