China's yuan steadies but stocks plunge as trade tensions grow
On Tuesday China's tumbling yuan steadied as authorities took steps to contain its slide while stocks plunged after Washington labeled Beijing a currency manipulator, marking a sharp escalation in U.S. trade tensions.
The U.S. Treasury Secretary Steven Mnuchin said on Monday that Washington would designate China a currency manipulator, its first such move since 1994, sending both the onshore and offshore yuan to record lows. The yuan dropped to the record low in offshore trade early in Asia, after Mnuchin's announcement, before bouncing to steady around 7.0642 per dollar.
The currency has slumped 2.3% over the past three days and broken past the symbolic 7-per-dollar level, pounding stocks and pushing bonds higher as investors feared the yuan's value had become a new front in the U.S.-China trade war.
The People's Bank of China's firmer-than-expected yuan fixing on Tuesday helped pull the currency away from these lows as did an announced bond sale in the offshore market, seen as signs authorities wanted to stem the rout.
The PBOC fixed the yuan midpoint, which sets the point around which the currency is allowed to trade, at 6.9683 per dollar, firmer than market expectations. However, the currency's stabilization on Tuesday was not enough assuaged markets but did halt their slide by midsession.
The Shanghai Composite Index (SSEC) fell over 2% to 2,733.92, touching its lowest level since February, while Hong Kong's Hang Seng Index (HSI) hit it's lowest since January before paring some of the losses.