Yuan Renminbi. Picture: EPA/WOO HE
China’s currency has fallen about 5% since August. Picture: EPA/WOO HE

SHANGHAI — China’s yuan rose on Monday as the central bank announced a fresh move to deter offshore speculation in the currency, while stocks rebounded modestly from levels last seen at the depths of last year’s summer crash.

The People’s Bank of China (PBOC) said it would start implementing a reserve requirement ratio (RRR) on offshore banks’ domestic deposits, in a move that seemed intended to soak up additional liquidity.

"The market sees that this is a gesture by the PBOC to warn speculators that are betting on a fast depreciation of its currency," said Zhou Hao, senior emerging markets economist for Asia at Commerzbank in Singapore.

A turbulent start to this year, with currency and stock markets tumbling, has stoked concerns that Beijing’s policy makers are in danger of fumbling as China heads towards its slowest growth in 25 years.

Beijing will release gross domestic product data for 2015 on Tuesday.

Global markets have also tumbled this month, with Asian shares sliding on Monday to their lowest levels since 2011 following weak US economic data and sharp falls in oil prices.

Ever-contrary, the country’s notoriously volatile stock markets opened sharply lower on Monday but reversed course to buck the global trend, with the benchmark Shanghai Composite index and the CSI300 index of the largest listed companies in Shanghai and Shenzhen both edging up 0.4%.

After recent jitters, investors took some comfort from data that showed a continuing recovery in the housing market. But sentiment remained fragile, with analysts expecting further turbulence ahead.

Chinese equities had tumbled on Friday, with the Shanghai index closing lower than at any time since December 2014, leaving investors who put their faith in Beijing’s measures to end last summer’s crash nursing losses.

"After experiencing the crashes last year, the sentiment is quite vulnerable and pessimistic now," said Xiao Shijun, an analyst at Guodu Securities in the Chinese capital.

China’s currency has fallen about 5% since August, and while most analysts expect further weakening, the authorities have been loath to allow it to depreciate too fast.

Monday’s move by the PBOC was seen by some as being — at this stage — more of a symbolic warning to banks, aimed at discouraging them from being too active in yuan dealings as part of its broader campaign to deter those betting offshore that the currency will fall.

Reuters