Hong Kong slumps on currency fears

THE ASIAN currencies came under renewed pressure yesterday and Hong Kong equities slumped amid disappointment over Japanese financial reforms and growing fears of a devaluation of the Chinese yuan.

The yen weakened against the dollar and Deutschmark following a keynote speech by Keizo Obuchi, the new Japanese Prime Minister, on economic reform. There was heavy selling of the Hong Kong dollar, and the Chinese yuan fell to a five-year low against the US dollar on Shanghai's black market.

Vietnam devalued its currency in an attempt to improve export competitiveness. The state bank lowered the "fixing rate" of the dong to 12,998 to the US dollar from 11,814.

In Hong Kong, a year to the day after the Hang Seng equities index hit an all-time high of 16,820, the market tumbled to its lowest level in three years. Yesterday the index closed at 7,018.4, down 235.95 points.

In his first policy speech before parliament, Mr Obuchi promised tax cuts for next year worth well over 6 trillion yen (pounds 27bn). He reaffirmed his commitment to reforming Japan's banking system, although analysts were disappointed by the lack of detail, and the yen weakened to 146 to the US dollar.

Stephen Hannah, chief economist at IBJ International, said: "What the market is looking for is a more realistic approach. It's looking for dramatic surgery on the banking system." Michael Derks, of Nomura International, agreed that financial sector reform should be the priority for the new government. He said: "Tax cuts aren't the solution. What desperately needs to happen is the banking sector needs to be fixed up."

A senior US Treasury official urged Japan to move quickly to enact the economic stimulus package and reform its banking sector. He said: "Prime Minister Obuchi outlines some promising and constructive steps to stimulate Japan's economy. We urge the government to move as quickly as possible to put them into place."

The renewed yen weakness and the worsening economic conditions in China rekindled fears of a devaluation in the yuan. Mr Derks said: "The situation in China has definitely worsened. The floods will have an enormous economic impact."

The yuan fell to 9.2 to the US dollar on the Shanghai black market, 9 per cent lower than the official rate. Analysts said fears of a Chinese devaluation also lay behind the fall in the Hang Seng and the pressure on the Hong Kong dollar.

News
Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
PROMOTED VIDEO
Sport
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
Life and Style
food + drink
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
tv
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Life and Style
life
Arts and Entertainment
Tennis player Andy Murray's mum Judy has been paired with Anton du Beke for Strictly Come Dancing. 'I'm absolutely delighted,' she said.
tvJudy Murray 'struggling' to let Anton Du Beke take control on Strictly
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits