- Wang Ju, a senior currency strategist at HSBC Holdings Plc
China's benchmark money-market rate slid the most in five months and the nation's currency weakened in offshore trading following the People's Bank of China's decision to cut its benchmark interest rate and relaxed reserve requirements for some lenders. The move was aimed at lowering borrowing costs and stabilizing growth in the world's second biggest economy. The central bank slashed its one-year benchmark lending rate by 25 basis points to 4.85%, the lowest rate in more than five years, and its one-year deposit rate by the same scale to 2%. The central bank has rarely trimmed both interest rates and the reserve-requirement ratio on the same day. The last time it did so was in October 2008, the height of the global financial crisis. The PBOC began its monetary policy easing cycle in November, and some economists had predicted it would be forced to move again in the next few months. Nevertheless, most had expected the central bank would hold off until the second-quarter economic growth figures were released. The decision comes after the Shanghai Composite Index plunged 19% over the least two weeks and 7.4% on Friday.
Yet, policy makers have refrained from letting the Chinese Yuan weaken this year, a move that would help support exports, as they encourage greater global use of the currency in an attempt to win reserve-currency status at the International Monetary Fund.
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