Taiwan also nudged up its overnight lending rate, the rate at which banks borrow and lend to each other, by one basis point to an eight-month high. Financial markets, including high yielding assets, dipped because of expectations of further monetary tightening, with the Australian dollar slipping from a 26-1/2-month high against the euro and Shanghai shares easing off their early highs.
Some analysts said investors were unduly worried because the Chinese central bank's latest steps were only gentle restraints on the economy to prevent it from overheating. Most economists expect the central bank to wait with any substantial rise in benchmark deposit and lending rates until around the middle of the year.
China's bill auction is the latest in a series of steps to gradually withdraw the easy money made available to soften the impact of the global financial crisis, with Asia seen at the forefront of such a pull-back. Shanghai shares later shrugged off China's bill auction results while the Chinese bond curve flattened, as traders welcomed the PBOC's decisiveness to act early in reining in excessive market liquidity.