China Gloom Dampens Rate Cut Optimism In Asia

The yuan has experienced a sharp decline and Chinese shares tumbled, leading to broad market declines in Asia and tempering an equity rally fueled by a surprise rate cut in Switzerland, Rae Wee reported for Reuters.

The yuan's decline has been driven by increasing market expectations that Beijing will implement additional stimulus measures to stabilize the world's second-largest economy.

Traders remained vigilant as the yen approached multi-decade lows despite efforts from Japanese government officials to support it and the central bank's recent policy pivot.

China's yuan weakened significantly, reaching a four-month low and breaching the psychologically significant 7.2 per dollar level. It was last nearly 0.4% lower at 7.2243. The decline prompted major state-owned banks in China to sell dollars for yuan in an attempt to curb its depreciation, according to Reuters sources.

The yuan's decline has been driven by increasing market expectations that Beijing will implement additional stimulus measures to stabilize the world's second-largest economy, exacerbated by the weakening yen.

However, the state bank interventions did little to calm investor apprehensions.

Both the mainland blue-chip CSI300 index and the Shanghai Composite index fell by 1%, while Hong Kong's Hang Seng Index slid by 2%.

"Sentiment is very fragile today," said Wong Kok Hoong, head of equity sales trading at Maybank, citing concerns over weak earnings at Chinese companies and ongoing issues in the country's property sector, among other factors.

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