MNI CHINA MARKETS: Yuan Weaker; Rates Fall; Shanghai Comp down

     BEIJING (MNI) - The Chinese yuan weakened to 6.3345 against the U.S. dollar

from Monday's 6.3266 closing, following today's lower fixing.  

     The PBOC set the yuan central parity rate against the U.S. dollar at 6.3312

on Tuesday, weaker than Monday's 6.3267. The central bank's lower rate set came

after seven consecutive trading days of stronger fixings.

***COMMENT: The yuan appreciated 1.3% last week, the biggest weekly gain since

the week ending Sept 8. Market sources told MNI that the PBOC has worked hard to

keep policy continuity. The PBOC is expected to add liquidity into the forex

market at a gradual pace to slow the sharp yuan appreciation. 

     Interbank market rates fell Tuesday even after PBOC drained net CNY240

billion after refraining from conducting open-market operations. 

 - 7-day repo average last at 2.8476%, lower than 2.9039% yesterday 

 - Overnight repo average 2.5243%, down from 2.5408% yesterday. 

***COMMENT: The PBOC returned to a "neutral and tight" bias after unexpected

looseness in the first two weeks of 2018. Today was the fourth trading day that

the central bank skipped conducting OMOs, draining CNY770 billion in total.

     The yield on 10-year China government bonds last traded 3.9350%, down from

3.9400% at Monday's close: Wind Information 

The Shanghai Composite Index was last 0.74% lower at 3,497.00, while Hong Kong's

Hang Seng Index fell 0.25% to 32,882.53.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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