Yuan gets breather as Hang Seng falls
Finance | Tracy Hu and Reuters 18 Jul 2018
China's yuan firmed against the US dollar yesterday in brisk dollar selling as investors held back from testing the psychologically important 6.7 per dollar level, albeit after a much-weakened official fixing, traders said.
Prior to market opening, the People's Bank of China lowered the midpoint rate to 6.6821 per dollar, the weakest level since August 9, last year and 63 pips or 0.1 percent softer than the previous fix of 6.6758.
Yesterday's fixing largely matched market forecasts. In the spot market, the onshore yuan opened at 6.6870 per dollar, easing to a low of 6.6905 before switching direction and bouncing back.
In the equity market, the Hang Seng Index declined 358 points, ending its three-day consecutive gains.
Index heavyweight Tencent (0700), in which an investor offloaded HK$50 million worth of shares, lost 1.47 percent. Smartphone maker Xiaomi Corp (1810) slid 0.7 percent despite the news that it has teamed up with Korea's two-largest telecom companies SK Telecom and KT to launch Redmi Note 5 in South Korea. Electric-car maker BYD (1211) fell for the second day, losing 1.88 percent.
Meanwhile, China's state planning agency yesterday said it is still confident of hitting its economic growth target of around 6.5 percent this year despite views that it faces a bumpy second half as a trade row with the United States intensifies.
The remarks came a day after China reported slightly slower growth for the second quarter and the weakest expansion in factory activity in June in two years, suggesting a further softening in business conditions in coming months as trade pressures build.
Even after Monday's weaker data and the latest US tariffs, most economists predict Beijing is still likely to come in around its official GDP growth target this year, though some China watchers believe activity levels are already much weaker than official data suggest.
Yan Pengcheng, spokesman for the National Development and Reform Commission (NDRC), told a news conference that China has ample policy room to deal with any shocks. "Overall, we have the confidence, conditions, and enough capability to effectively cope with the uncertainties in the world economy and make sure we accomplish the target we set at the beginning of the year," said Yan.
