The yuan stabilized against the dollar on Monday after a cut in a benchmark interest rate from the Chinese Central Bank, although the measure was deemed insufficient by the market.
Around 6:45 p.m. GMT, the yuan, whose exchanges are supervised by the authorities, gained 0.02% to 7.2833 yuan for one dollar. Earlier in the session, it fell 0.22% to 7.3005 yuan per dollar. Thursday, the currency had fallen to its lowest since November, 7.3175 yuan for the dollar.
On Monday, China decided to cut the one-year interest rate, which serves as a benchmark for business loans, from 3.55% to 3.45% to revive the economy by counting on more loans to individuals and businesses. . The 5-year interest rate was kept stable at 4.2%.
Highly followed by the markets, these two rates are at historic lows.
This is not enough, said UBS analysts, recalling that the market was expecting a larger drop of 15 basis points.
As policymakers have entered a phase of stronger (economic) support, the approach so far has been too measured to revive general confidence, they continue.
China is indeed facing a serious crisis in the real estate sector, and the post-Covid recovery hoped for in China after the lifting of health restrictions at the end of 2022 is running out of steam.
The yen weakened by 0.67% against the euro at 159.29 yen and by 0.53% against the dollar at 146.16 yen.
Despite stretched US bond yields, the dollar lost 0.23% against the euro at 1.0898 dollars and 0.20% against the pound at 1.2760 dollars. Ten-year rates again crossed their 2007 peak of 4.33%.
Later this week, the market’s attention will turn to the annual meeting of central bankers in Jackson Hole, USA, where Jerome Powell, Chairman of the US Federal Reserve (Fed) and Christine Lagarde, President of the Central Bank European Union, are due to deliver speeches on Friday.
Currency traders will work to find clues about the future of the monetary policy of the two institutions.
With inflation falling faster in the US than in Europe or the UK, we believe the peak is nearer for US rates than for European rates, and the Fed may consider easing policy sooner than other central banks, say UBS analysts.
On the cryptocurrency side, bitcoin was stabilizing around $26,000 after its steep losses last week, trading slightly lower by 0.75% to $26,035.
Bitcoin had touched $25,314.20 on Friday, its lowest price since mid-June, dragged down by the climate of risk aversion in the markets.
Monday class Friday class
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6:45 PM GMT 9:00 PM GMT
EUR/USD 1.0898 1.0873
EUR/JPY 158.29158.09
EUR/CHF 0.9574 0.9589
EUR/GBP 0.8540 0.8538
USD/JPY 146.16145.39
USD/CHF 0.8786 0.8819
GBP/USD 1.2760 1.2734