China Gold Premium to the rest of the world hit a new record of $120 an ounce as Beijing defends yuan
Gold in China is trading at a record premium to international prices, a sign of Beijing’s escalating battle to defend its currency. Bullion on the Shanghai Gold Exchange traded at a premium of more than $120 an ounce on Thursday, according to calculations by Bloomberg. That’s the highest since the exchange was founded over two decades ago, as a weak yuan drove up prices in recent weeks. Source: Bloomberg
China Budges in Fight With Bears, Sending Yuan Toward Record Low – Bloomberg
The offshore yuan weakened toward its lowest on record against the dollar, as a cut to the daily reference rate for the managed currency stoked bets China is comfortable with a gradual depreciation. China’s currency declined to about 7.36 per dollar in overseas trading, beyond the psychologically important level of 7.35 and close to the weakest since the creation of the offshore yuan market in 2010. The move came after the People’s Bank of China set its so-called fixing at a two-month low on Friday.
China Uses Another Tool to Aid Yuan in String of Market Support – Bloomberg
China moved to support the yuan by increasing the supply of foreign currency in its local market, part of a multi-pronged effort by Beijing to restore confidence amid sluggish growth. Financial institutions will need to hold just 4% of their foreign-exchange deposits in reserve starting Sept. 15, the People’s Bank of China said Friday, compared to the current level of 6%. The greater availability of overseas currency relative to the yuan effectively boosts the allure of the latter. The so-called FX RRR cut came on the heels of Thursday’s reduction in down payments for mortgages to help the country’s under-pressure residential property market and after policymakers lowered stamp duty for stock trading over the weekend. The combination of supportive measures is a sign that Beijing is growing uncomfortable with increasing pessimism in its financial markets.
The PBoC is putting more measures in place to slow the depreciation trend in the yuan
Overnight, the Chinese central bank set its yuan fixing at 7.2006 per dollar compared to the average estimate of 7.3047. The gap - an unprecedented 1,041 pips - was the largest gap to estimates since the poll was initiated in 2018. Source: Bloomberg, zerohedge
In case you missed it -> The Yuan exceeds dollar in China's bilateral trade for first time
The yuan was used in 49% of China's cross-border transactions last quarter, topping the dollar for the first time, a Nikkei analysis shows, mainly due to a more open capital market and more yuan-based trade with #Russia. Nikkei looked at international trade by companies, individuals and investors based on currency, using statistical data from the State Administration of Foreign Exchange of China. Nikkei's compilation does not include yuan-based settlements for trades and capital transactions that do not involve China as a counterparty. Source: Asia Nikkei
