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China's biggest yuan rate move in 11 years | |
(about 4 hours later) | |
China has raised the exchange rate for its currency, the yuan by 0.56% against the US dollar, from the previous day. | |
The central bank - People's Bank of China (PBOC) fixed the yuan rate at 6.4589 to the US dollar on Friday. | |
That is the biggest increase in nearly 11 years. | |
China only allows the yuan to rise or fall 2% on either side of the PBOC's daily fix, to avoid volatility and maintain control over the Chinese currency. | |
Analysts have pointed out the move is not a reflection of future yuan policies. | |
Some have argued the PBOC's move is a knee-jerk reaction to US dollar weakness overnight. The US dollar had fallen sharply against the yen after the Bank of Japan surprised markets and decided against any extra monetary easing. | |
"The expectation for a stronger yuan fix was laid by the gains for the yen after the Bank of Japan announcement," said Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong. | |
According to data compiled by financial news network Bloomberg, Friday's increase is the strongest daily move by the PBOC since July 2005. | |
China spooked global investors with a surprise devaluation in August last year, when it guided the currency down by nearly 5% in a week. | |
Asian markets lower | |
Market reaction to the move, however, has been muted. On the mainland the Shanghai composite index had lost 9.06 points or 0.31% to 2,936.53 by midday. | |
Over in Hong Kong the Hang Seng index lost 1.35% or 288.56 points to 21,099.47. | |
Many Asian markets have traded lower, following overnight weakness in US markets. | |
South Korea's Kospi index was down by 0.5% at 1990.94. | |
Over in Australia the benchmark S&P ASX 200 was relatively flat, at 5,247.60. | |
The region's biggest market, Japan is shut on Friday for a national holiday. The benchmark Nikkei 225 index ended the shortened trading week down 5%. | The region's biggest market, Japan is shut on Friday for a national holiday. The benchmark Nikkei 225 index ended the shortened trading week down 5%. |
US markets closed lower overnight. Losses on Wall Street accelerated on Thursday afternoon, with some investors rattled by a 3% decline for shares in Apple. |