China’s Yuan Falls Sharply in Offshore Market

TOKYO (AP) – World shares rose Wednesday after China reported improved exports in December, salving nerves about the world’s No. 2 economy, though a rally in Shanghai’s stock market was short-lived.

“A return to growth for exports after five months of contraction is a reassuring sign, and further evidence that the economy is not teetering on the brink”, Bloomberg economist Tom Orlik said in a report to clients. Analysts polled by Reuters had expected exports to fall 8.0 percent and imports to fall 11.5 percent. Onshore, where the yuan can trade up or down 2 per cent from the central bank’s daily fix, the currency traded at 6.5866, roughly unchanged from the previous day. China’s market was halted twice in the first week of the year as the CSI 300 Index of bigger companies tumbled more than 7 percent intraday, prompting regulators to scrap a new circuit breaker system only four days after implementing it.

China’s slowdown likely contributed to the economic slowdown in sub-Saharan Africa, where growth fell from 4.6 percent in 2014 to 3.4 percent in 2015, according to a new World Bank report.

The U.S. dollar and commodity-based currencies including the Australian and Canadian dollars rose against the yen and euro on Wednesday as the Chinese yuan steadied and oil prices jumped, increasing the market’s appetite for assets that provide higher yield. “But the exchange rate will remain stable in the near- term as investors are cautious now due to the PBOC’s intervention this week”. In Asia, stocks rallied despite a 2.4 percent drop in the Shanghai Composite. Global markets were rattled by steep falls in Chinese stocks and a bigger than usual drop in the tightly controlled yuan.

THE QUOTE: “The fact that China’s fiscal and monetary stimulus is not reaching China’s most important part of the economy should be a major concern”, said Angus Nicholson, a market analyst at IG in Melbourne, Australia.

Brent crude had fallen 2% to $30.27 a barrel at around 3.30 a.m. ET.

In the freely traded offshore market, the yuan traded at 6.6162 to one United States dollar, up 0.3 per cent from the previous day.

Slight gains in early early trade put the yuan 0.1 per cent up on the week, but it was still almost 1.4 per cent weaker against the dollar than it started the year and has lost almost 5 per cent since August. “Investors see no good reason to buy stocks now – the yuan is depreciating, the U.S.is raising rates, and the economy is deteriorating”. The Standard & Poor’s 500 index gained 31.56 points, or 1.7 percent, to 1,921.84.

ENERGY: U.S. crude oil rose 36 cents, or 1.2 per cent, to $30.80 a barrel in electronic trading on the New York Mercantile Exchange.