SHANGHAI: China’s yuan weakened slightly against the dollar on Tuesday while Chinese bond prices rose, amid rising expectations of further monetary easing by Beijing.
Onshore spot yuan was changing hands around 7.1450 per dollar at midday, 84 pips weaker than the previous late session close, even after China’s central bank set a stronger midpoint rate at 7.0965.
Several listed banks, including Ping An Bank, China Zheshang Bank, Shanghai Pudong Development Bank and China Citic Bank, have announced cuts in deposit rates, following the lead of China’s big state banks, the official Shanghai Securities News reported on Tuesday.
The latest round of deposit rate cuts, designed to ease pressure on banks’ shrinking margins, has fuelled expectations of fresh monetary easing, including cuts in benchmark lending rates and reserve requirements.
Those expectations helped to push China’s 30-year treasury bond futures to record highs on Tuesday. Bond prices move inversely to rates.
“The bond market remains bullish, and market rates will trend lower,” Guotai Junan Futures said in a note on Tuesday.
China’s yuan nearly steady in thin trade
Meanwhile, some analysts doubt the US Federal Reserve will cut interest rates anytime soon, meaning the gap between US and Chinese yields would remain wide for a while.
“Judging from inflation levels and economic fundamentals, we don’t think the Fed will start cutting rates in the first half of next year,” Nanhua Futures wrote, adding that the currency market is less volatile this week due to the Christmas holiday.
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