Mar­ket tur­moil hits the yuan

China Daily (Canada) - - FRONT PAGE - By CHEN JIA in Bei­jing chen­jia1@chi­nadaily.com.cn

Rip­ple ef­fects from the stock mar­ket plunge have put the yuan un­der pres­sure and prompted the gov­ern­ment to in­tro­duce more mea­sures to re­store stock ex­change sta­bil­ity.

How­ever, the sharp de­cline in share prices should have a lim­ited im­pact on the over­all fi­nan­cial sys­tem and the real econ­omy, ac­cord­ing to ex­perts.

The off­shore-traded yuan de­clined for three con­sec­u­tive trad­ing days to 6.2279 yuan per US dol­lar on Tues­day, the low­est level since April 13.

In the for­ward ex­change mar­ket, the cur­rency suf­fered its big­gest daily fall in four months as for­eign funds pulled money out of Chi­nese main­land stocks on signs that the cen­tral gov­ern­ment may not be able to stem the mar­ket rout.

Mean­while, the un­cer­tainty over whether Greece will leave the eu­ro­zone will con­tinue to strengthen the US dol­lar in the short term, putting more de­pre­ci­a­tion pres­sure on the yuan.

In­vestors bet on a drop to 6.4064 yuan per US dol­lar in a year’s time, a 3 per­cent de­pre­ci­a­tion from the cur­rent value. This in­di­cated con­cern over fur­ther fi­nan­cial risks aris­ing from the stock mar­ket tur­moil.

Thierry Wiz­man, a re­searcher at Mac­quarie Group, said for­eign ex­change traders are short-selling the off­shore yuan when A-shares suf­fer heavy losses.

The bench­mark Shang­hai Stock Com­pos­ite In­dex re­treated to a three­month low of 3,507.19, a 5.9 per­cent drop on the day, at the close of trad­ing on Wed­nes­day, while the Shen­zhen Com­po­nent In­dex closed at 11,040.89, down 2.9 per­cent. The CSI 300 In­dex, which tracks shares in the largest com­pa­nies listed in Shang­hai and Shen­zhen, fell 6.8 per­cent.

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