The Chinese Yuan weakens after the central bank cut a key short-term interest rate

the People’s Bank of China On Tuesday, it cut its main short-term borrowing rate as it grapples with disappointing economic data in the country after the Covid-19 reopening failed to gain momentum.

The People’s Bank of China (PBOC) lowered the seven-day reverse repo rate by 10 basis points 2% to 1.9%, according to the central bank’s release, by injecting 2 billion Chinese yuan ($279.97 million) through seven-day repurchase agreements. a repurchase agreement (repo) It is a type of short-term borrowing rate.

It is the central bank’s first such move since August and follows the country’s largest banks cutting deposit rates last week, suggesting more monetary easing is ahead.

The move comes ahead of the People’s Bank of China’s Medium Lending Facility rate decision, which is expected to be released on Thursday. Meanwhile, the base interest rate for the loan is scheduled to be released on June 20.

The Chinese inland yuan fell 0.25% to 7.1618 against the US dollar after a brief rally on Tuesday, hovering around its weakest level since November.

“Now we will see the Chinese [monetary] Politics will become more supportive,” Yang Liu, chief investment officer of Atlantis, told CNBC’s “Street Signs Asia.”

What is the Chinese government basically? [expected] to do [is] Trying hard to support domestic consumption, especially in the private sector.”

UBS Global Wealth Management also expects further policy easing, it said in its June outlook report. “We believe that monetary policy will continue to focus on keeping liquidity ample and credit growth stable,” it said, and expected the central bank to make one to two “modest” cuts in the reserve requirement ratio or lower the average lending facility rate by 5 to 10 basis points. In the second half of this year.

“Larger moves, however, could worsen currency pressure, which policymakers want to avoid, and bring diminishing returns if not accompanied by demand stimulation,” she added.