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Asia, Forex

PBOC issues yuan bills in Hong Kong, says sale now the norm

* PBOC sells 20 bln yuan 3-mth tranche at a coupon of 2.9%

* 10 bln yuan 1-year tranche sold at 2.95%

* Says has established regular mechanism for such issuance in HK (Adds central bank statement, details)

HONG KONG, Aug 14 (Reuters) – The People’s Bank of China issued 30 billion yuan ($4.27 billion) of offshore bills in Hong Kong on Wednesday, just a week after the yuan slumped past the key level of 7 per dollar.

The 20 billion yuan three-month tranche was priced with a coupon of 2.9%, while the 10 billion yuan one-year tranche was sold at 2.95%, the Hong Kong Monetary Authority said in a statement published on the Hong Kong government website on Wednesday.

Investors ranging from commercial banks, investment funds to central banks oversubscribed for the bills by 2.6 times, the PBOC said in a statement published later in the day.

The Chinese central bank said it has now established a regular mechanism for such issuance in Hong Kong, noting that it has issued 120 billion yuan worth of offshore bills in the city since such operations began last November.

“This will be beneficial for enriching the series of high credit quality yuan investment products and tools for managing yuan liquidity in the Hong Kong market,” the PBOC said, adding it would also help promote the internationalisation of the yuan.

Some traders believe the PBOC at times influences the yuan exchange rate through issuing these bills, which they say can soak up liquidity and stem speculative short-selling of the currency.

The central bank announced plans to issue the latest batch of bills last week, just a day after the yuan weakened past the 7 per dollar barrier amid fresh U.S. tariff threats, and as Washington labelled China a currency manipulator.

The yuan rallied to its strongest in a week against the greenback, after Washington decided to delay some of those tariffs. It was trading offshore at 7.0312 per dollar by 0623 GMT. ($1 = 7.0209 Chinese yuan ) (Reporting by Noah Sin and Beijing Monitoring Desk Editing by Jacqueline Wong)

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