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China's central bank pumps 6.04 bln USD into money market this week

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BEIJING, Aug. 19 (Xinhua) -- China's central bank, pumped 41 billion yuan (6.04 billion U.S. dollars) into the money market this week through its open market operations, ending a four-week stretch of money tightening.

In its open market operations Thursday, the People's Bank of China (PBOC) sold 11 billion yuan (1.62 billion U.S. dollars) of three-month bills at a yield of 1.5704 percent.

The three-month bill yield has been steady at 1.5704 percent since early June.

The central bank also conducted 70 billion yuan (10.31 billion U.S. dollars) worth of 91-day repurchase agreement operations on Thursday at a yield of 1.57 percent.

Offsetting the 166 billion yuan (24.45 billion U.S. dollars) of bills and repurchase agreements that matured this week, the PBOC realized a net injection of 41 billion yuan into the market with new bill issues and repurchase agreements in its open market operations Thursday and Tuesday.

The PBOC auctioned 44 billion yuan (6.47 billion U.S. dollars) of one-year bills in its regular open market operations Tuesday at a yield of 2.0929 percent.

Analysts said the shift by the PBOC from money absorption to injection in the open market operations indicated a fine tuning of monetary policy.

The money market was slightly tighter with the initial public offering by the China Everbright Bank, which raised 3.2 billion dollars in country's second-largest listing of the year.

"The central bank has used the monetary policy instrument in a much more balanced way since July," said Jiang Feng, an analyst at Shanghai Oriental Wealth & Securities Institute.

Jiang said the PBOC was changing its pace between money absorption and injection more frequently, as compared with one-sided tightening for months in a row in the past.

The PBOC had drained a total of 250 billion yuan (36.82 billion U.S. dollars) from the market over the four consecutive weeks since July 20.

Previously, the PBOC had conducted net injection operations for eight straight weeks since May 25, pumping a total of 900 billion yuan (132.55 billion U.S. dollars) to ease the money squeeze.

E Yongjian, a financial analyst at the Bank of Communications, said that under a stable macro policy, it was less likely the central bank would sharply tighten or loosen its montary policy in the coming months.

"China's macro economy is facing uncertainty with persistent inflationary expectations, so the PBOC won't change too easily," E said.

He predicted the PBOC would depend more on short-term intruments such as three-month bills and 91-day repurchase agreements to carry out its flexible open market operations.

The PBOC announced early this month it would maintain a moderately loose monetary policy and apply multiple tools to keep an appropriate growth of money supply to balance the need for maintaining economic development with managing the inflation expectations.

It reiterated it would maintain continuity and stability in monetary policy while making the policy more specific and more flexible.

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