MNI CHINA MARKETS: Yuan Stronger; Rates Down; SH Shares Down

     BEIJING (MNI) - The Chinese yuan climbed to 6.3960 against the U.S. dollar

from yesterday's 6.4042 closing, following today's higher fixing.  

     PBOC set the yuan central parity rate vs the U.S. dollar at 6.3916 on

Wednesday, stronger than Tuesday's 6.4009. PBOC has set the fixing stronger for

four consecutive trading days. Today's fixing marks the highest since Dec 4,

2015.

***COMMENT: The yuan continues to rise but at a slower pace compared with the

sharp rally at the beginning of the year, as the U.S dollar starts to gain.

Market sources said the yuan would not lose steam in the short term with the

support of a strong forex sale demand. 

     Interbank market rates fell after PBOC injected net CNY50 billion by

open-market operations. 

  - 7-day repo average last at 2.7193%, lower than 2.8373% yesterday 

  - Overnight repo average 2.5408%, lower than 2.5702% yesterday. 

     ***COMMENT: The PBOC continues to increase liquidity injections, according

to MNI interbank market sources, due to concerns that the large cash demand

would trigger a liquidity crunch, as it did at the end of last year. The

cross-year liquidity would be loose as the contingent reserve arrangement (CRA)

will be launched tomorrow, which is expected to inject about CNY300 billion into

the interbank market. 

     Yield on 10-year China government bonds last traded 3.9400%, unchanged from

3.9400% close yesterday: Wind Information 

The Shanghai Composite Index was down 0.42% to 3,531.14, while the Hang Seng

Index in Hong Kong fell 0.54% to 32,751.24.

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

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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