China to sell new yuan bills in Hong Kong – a new tool to control the currency now at a 10-year low
- Fresh signs of trade-war pressure as manufacturing activity falls
- Numbers show further economic slowing and could prompt more policy support from Beijing after previous initiatives fail to spark revival
The People’s Bank of China (PBOC) has rolled out a new financial tool to help it defend the yuan’s exchange rate, fixing the currency at a new 10-year low to the US dollar as weaker-than-expected domestic economic data threatened to push it lower.
Manufacturing and service sector activity data released on Wednesday morning caught many analysts on the hop and the national currency slipped towards the psychologically important level of 7 to the US dollar. The PBOC fixed it lower at 6.9646 per US dollar compared with 6.9574 one day earlier. It allows the yuan to move 2 per cent either side of the fix.
The official purchasing managers’ index (PMI) fell to 50.2 in October, the lowest since July 2016 and down from 50.8 in September. A figure below 50 represents a contraction. New export orders, an indicator of future activity, contracted for a fifth straight month and at the fastest pace in at least a year.
The PBOC said it would now auction 10 billion yuan (US$1.4 billion) in three-month bills and 10 billion yuan in one-year bills in Hong Kong next Wednesday – its尸first such debt issue in the city that
establishes an official mechanism to conduct monetary policy outside the mainland.