The Chinese yuan is maintaining its relatively flat performance for the week on Thursday. Foreign exchange markets have been monitoring the central bank’s latest liquidity injection into the banking system, despite the institution pledging to adopt a tighter approach to monetary policy in 2021. Although the yuan has extended its gains from 2021 into the new year, the currency has been trading sideways against its US peer in recent sessions.
On Thursday, the People’s Bank of China (PBoC) pumped close to $39 billion of liquidity into the financial system through seven-day reverse repurchasing agreement operations at an interest rate of 2.2%.
According to a statement on the PBoC’s website, more than $300 million of reverse repos matured on Thursday, resulting in a net liquidity injection of about $38 billion.
This comes only a few days after the PBoC inserted $308.4 billion into the marketplace through seven-day reverse repos.
Earlier this week, the PBoC kept its benchmark loan prime rate (LPR) unchanged. Officials left the one-year LPR at 3.85%, while the five-year LPR held steady at 4.65%.
On the data front, year-to-date foreign direct investment (FDI) rose 6.2% in December, down from 6.3% in November. The market had penciled in growth of just 6%.
Over the last month, the PBoC has signaled that it intends to impose a more cautious strategy to monetary policy. This year, central bank officials want to home in on the real economy by supplying financial services with the tools they need to support small businesses and ensure high-quality growth.
In other Chinese data, retail investors are pouring into the stock market, with close to two million share trading accounts launching in December. This is about double from the same time in the previous year. Beijing has been promoting its bull market, encouraging mom-and-pop traders to begin buying stocks.
The USD/CNY currency pair tumbled 0.07% to 6.4621, from an opening of 6.4665, at 17:39 GMT on Thursday. The EUR/CNY advanced 0.35% to 7.8557, from an opening of 7.8287.