The
People’s
Bank of China set the onshore yuan reference rate a mammoth 400+
points lower (i.e. higher for USD/CNY) today, to the weakest for the
onshore yuan since February of 2008. Offshore yuan responded by
dropping to its lowest ever (i.e. highest on record for USD/CNH)
around 7.3650.
In
addition, the PBOC and the State Administration of Foreign Exchange
(SAFE) relaxed a cross-border funding rule, aimed at encouraging
capital inflow. The weakening yuan has been working to encourage
capital outflow, a key concern of Chinese authorities.
Shares
in mainland China and Hong Kong fell further in morning trade, though
not close to epic drop on Monday:
Across
major FX moves were subdued. We had comments again from Japan’s
finance minister Suzuki, with little impact. AUD, NZD and others gave
a little ground against the US dollar on the PBOC reference rate
setting.