Limited offshore yuan response to first PBoC rate cut in 2 years

FXStreet (London) - After the People’s Bank of China announced this morning that it would be cutting interest rates for the first time in two years, the response of offshore yuan trading was relatively benign, swinging to an initial CNH6.1230 on the announcement from the PBoC before whipsawing back up to highs at CNH1.12.99. The offshore yuan is now trading at CNH1.1273, up 0.02 percent on the morning session.

The central bank has cut the 1-year lending rate to 5.6 percent with the 1-year deposit rate cut to 2.75 percent. The PBoC also raised the deposit-rate ceiling to 1.2 times the benchmark. The changes will be effective 22 November.

The move is a shift from the PBoC’s focus on targeted monetary easing and liquidity injections. The announcement comes against a backdrop of a steadily deteriorating outlook for Chinese growth.