China's yuan lost ground against the US dollar on Monday, while stocks climbed, after Beijing rolled out fresh stimulus to underpin the economy against stiff trade tariffs and sluggish domestic demand.
After markets closed on Friday, China's central bank said it was cutting the amount of cash banks must hold as reserves for the third time this year, releasing 900 billion yuan ($126.19 billion) in liquidity to shore up the flagging economy. The RRR cut came before data over the weekend showed the country's exports unexpectedly fell in August as shipments to the United States slowed sharply, pointing to further weakness in the world's second-largest economy and underlining a pressing need for more stimulus as the Sino-US trade war escalates.
The onshore yuan slipped 0.18% to 7.1278 per dollar at the official afternoon close at 0830 GMT, while the offshore yuan at that time had shed 0.22% to 7.1235 per dollar. Traders said the People's Bank of China (PBOC) appears to have used the daily fixing to brake the yuan' s decline once again. It set the midpoint - at which the spot rate can trade 2% on either side - at 7.0851 per dollar, stronger than Reuters' estimate of 7.094.
The yuan last week had its first weekly gain in three, buoyed by hopes Beijing and Washington would find a way to de-escalate tensions after trade negotiators from both sides agreed to meet in Washington in October.
"They (PBOC) won't let the yuan fall too much, because they know the US will keep an eye on the exchange rate. It is likely to be steady," a trader with a foreign bank in Shanghai said.
In the A-share market, gains were extended after a robust previous week, with the blue-chip CSI300 on Monday ending at a near five-month high and posting a seventh session of gains.
At the close, the CSI300 index was up 0.6% at 3,972.95, while the Shanghai Composite Index added 0.8% to 3,024.74.
Most sectors gained on the day, led by tech firms, as Beijing seeks tech self-sufficiency amid sanctions by the US on Chinese tech leaders, including Huawei.
The indexes tracking major IT and telecommunications firms on the mainland closed up 3.9% and 4.9%, respectively.
"The improved liquidity (as a result of the RRR cut) will tilt toward the real economy, in particular small and micro tech enterprises whose real borrowing costs would be lowered, and reinforce market participants' preference for the tech industry," Guoyuan Securities said in note.
In Hong Kong, stocks moved in and out of positive territory to end flat after Sunday saw fresh protests and violence. The Hang Seng index was unchanged at 26,681.40, while the China Enterprises Index lost 0.1%, to 10,417.39 points.
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