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PBOC Eases Cash Crunch Advancing Yuan; Baht Declines on Continued Unrest

by on December 27, 2013 8:01 pm GMT
 

The People’s Bank of China (PBOC) injected more cash in order to ease the troublesomely high rates. $4.8 billion, or 29 billion yuan, was released by the PBOC, causing the seven-day repo rate to fall 252. This caused the yuan to rise to 20-year highs. “The reverse-repo injection greatly eased market concern,” said Gao Hui, Beijing-based analyst at Founder

The yuan reached two-decade highs, reaching 6.0700 yuan per dollar. The yuan has traded .04 percent higher against the greenback in the last week, while the PBOC raised the reference rate bu .17 percent – the strongest peg to the dollar since July 2005. “The investor perception of the Chinese currency is that it’s stable with limited downside risks, and it gives a much higher yield compared to the U.S. dollar,” said  Sim Moh Siong, a FX strategist at Bank of Singapore Ltd.

The Thai baht continues to fall for the second consecutive week to the lowest levels since 2010 as the political unrest causes further capital outflows.  Global investors sold more Thai shares than bought, creating a $77.6 million share imbalance. Thai protesters are trying to block candidates from entering a new election and caused riots that resulted in 128 injuries and one death.

Thailand has seen massive outflows during this year’s political unrest with more than $6.2 billion pulled from Thai equities year-to-date. “The baht is driven by political sentiment and portfolio flows,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd.

The baht has lost 6.9 percent this year, and touched a three-year low of 32.873 per dollar.