SHANGHAI, (Reuters) – China guided its yuan currency sharply stronger for a second straight session last night local time in a move that might calm concerns about a competitive devaluation, but only added to market confusion as to Beijing’s ultimate policy intent.
Equity investors seemed less than reassured, with the Shanghai Composite Index and the CSI300 index both falling around 2 percent in erratic early trade, after a 10 percent plunge last week which triggered a global sell-off of riskier assets.
The People’s Bank of China set the mid-point for the yuan at 6.5626 per dollar, confounding analysts who had looked for something around 6.5860.
The move was an apparent reversal of the recent weakening trend which included the biggest one-day drop in five months.
China’s foreign exchange regulator on Saturday said it would ramp up risk control efforts and push ahead with regulatory reforms, but was frustratingly short on specifics.
The perceived missteps by the authorities have stoked concerns Beijing might lose its grip on economic policy, too, even as China looks set to post its slowest growth in 25 years. Both the Dow and S&P 500 SPX> had their worst five-day starts in history last week.
“Different signals about FX policy have wrong footed market participants and we are wary in believing that an immediate calmness will soon emerge,” wrote Paul Mackel, head of emerging markets FX research at HSBC in a note.
