The Chinese yuan experienced a significant drop, and stocks in China declined, contributing to a widespread downturn in Asian markets.
This overshadowed the initial boost to global equity markets following an unexpected interest rate reduction in Switzerland, which had led to speculation about potential monetary easing by other central banks.
Market participants remained vigilant as the Japanese yen neared its lowest levels in several decades, despite verbal interventions from Japanese officials and a notable shift in monetary policy by the Bank of Japan earlier in the week.
The yuan weakened considerably, reaching a four-month nadir and surpassing the key 7.2 per dollar threshold. It was last recorded down by nearly 0.4% at 7.2243.
In response to the yuan’s fall, major state-owned banks in China reportedly sold dollars to buy yuan, aiming to mitigate the decline, according to sources who spoke with Reuters.
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Expectations of additional stimulus measures from Beijing to support the world’s second-largest economy, coupled with the weakening yen, have put pressure on the yuan. However, the intervention by state banks did little to alleviate investor concerns.
China’s CSI300 and Shanghai Composite indices both dropped by 1%, while Hong Kong’s Hang Seng Index saw a 2% decline.
Conversely, Japan’s Nikkei index closed at another record high on Friday, buoyed by a positive sentiment on Wall Street regarding the U.S. economy and Federal Reserve policies.
The Nikkei 225 index rose by 0.2%, or 72.77 points, to close at 40,888.43, and the broader Topix index increased by 0.6%, or 17.01 points, to 2,813.22.
In the United States, stock markets continued to reach new highs, led primarily by substantial gains in the semiconductor sector.
The S&P 500 grew by 0.3% to 5,241.53, achieving a record high for the third consecutive day with gains in 75% of its stocks.
The Dow Jones Industrial Average advanced by 0.7% to 39,781.37, and the Nasdaq Composite increased by 0.2% to 16,401.84, both extending their record-setting performance from the previous day.
Meanwhile, the yield on the US 10-year Treasury bonds slightly decreased by 0.2 basis points, settling at 4.269%.
