The stabilization of the yuan calms markets

The stabilization of the exchange rate of the Chinese currency began to calm investors in the international capital markets on Monday. On the first day of the new week the Chinese central bank set a reference rate of the yuan, close to the level of the closing on Friday, fell speculation that may be continuing devaluation of the currency.

Market movements

The unexpected decrease in the yuan last week led to instability on the stock markets and raw materials worldwide. On Monday, Chinese markets posted growth, but the appreciation was limited by uncertainty about the future actions of the central bank. The main Shanghai Composite Index and CSI300 finished trading with a growth of respectively 0.7 and 0.1 percent.

In Europe, shares also stabilized after heavy losses last week, but failed to score growth. Pan-European indicators The Stoxx Europe 600 and the FTSEurofirst 300 advanced with 0.3% in early trade, but later returned to levels close on Friday. The same applies to the German index DAX, which lost 4% of its value last week. On bond markets, the positive trend was more stable. The most profitable are Greek bonds, whose yields fell to their lowest levels since January because of optimism about the new financial package for Athens. Wall Street futures started trading with a decline of about 0.1%.

“It seems gradually returned to calm on the currency policy of China, a key engine for global financial markets,” noted analysts at Danske Bank, quoted by the Wall Street Journal. Other experts, however, warn that the yuan may be subjected to further pressure for impairment due to the poor performance of the economy, which will probably lead to a new easing of Beijing.

Fed policy

Investors closely monitored and the US Federal Reserve, which has to decide whether to begin a long-awaited increase in interest rates at the beginning of next month. “With the approach of the expected increase in interest rates will be very difficult for risk assets to achieve some progress,” says Jeremy Carr, chief strategist at brokerage Charles Stanley.

Expectations for growth rates affect currency markets where the euro slid 0.1 percent to 1.1098 dollars. Turkish lira notes a new record low against the dollar because of the political instability in the country that could lead to early elections