CHINA MARKETS: Yuan Falls; Rates Down; Stocks Up

     BEIJING (MNI) - The yuan fell against the U.S. dollar Tuesday morning after

the PBOC set a weaker fixing for the day.

     The PBOC officially announced on Monday that the reserve requirement for

forward FX purchases will be reduced to 0% from the previous 20%, effective

immediately, which was interpreted by traders as meaning that the central bank

has become concerned that the rapid surge of the yuan exchange rate in recent

weeks could trigger an overshoot. 

     The yuan was last at 6.5449 against the U.S. unit, 0.42% weaker than the

official closing price of 6.5239 on Monday. 

     The People's Bank of China set the yuan central parity rate against the

U.S. dollar at 6.5277 Tuesday, compared with Monday's 6.4997. The PBOC set the

fixing weaker for the first time after 11 straight days of strengthened fixings.

     Money market rates were down on Tuesday morning after the PBOC skipped

open-market operations, resulting in a net zero injection/drain for the day.

     The seven-day repo average was last at 2.7766%, lower than Monday's average

of 2.8705%. The overnight repo average was at 2.6058%, lower than Monday's

2.6182%.

     The yield on benchmark 10-year China government bonds was last at 3.6064%,

up from the previous close of 3.5890%, according to Wind, a financial data

provider. 

     Stocks were up, led higher by the coal and steel sectors. The benchmark

Shanghai Composite Index was 0.11% higher at 3,380.64. Hong Kong's Hang Seng

Index was down 0.06% at 27,938.64.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,M$$FI$,MN$FI$,MN$FX$]