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Surprise from China: PBoC Lowers Interest Rates, Yuan Falls

July 5, 2012 at 12:32 by Vladimir Vyun

A fan of 50-yuan billsThe Chinese central bank made a surprise move today by cutting its interest rates for the second time in a month (the last cut was made in June and was the first after several years of stable rates). The Chinese yuan declined.

The People’s Bank of China decreased its main interest rate by 31 basis points to 6 percent. The bank also decreased the deposit rate by 25 points to 3 percent. Unlike the stimulating measures from the Bank of England and the European Central Bank, this decision was completely unexpected by market participants. The news caused a surge of fear, leading to speculations that the China’s economic slowdown is worse than was perceived.

USD/CNY rose from 6.3487 to 6.3569 as of 12:31 GMT today.

If you have any questions, comments or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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