Yuan bounces back to end longest losing streak, after People’s Bank of China says it will support currency

The yuan endured a roller-coaster ride on Tuesday, bouncing back sharply in the afternoon from a 11-month low in the morning, after the People’s Bank of China issued a statement during the lunch break in trading, saying it would support the currency.

The Chinese currency was trading at 6.70 against the US dollar in the morning amid worries about an intensified trade war between the United States and China. The onshore and offshore yuan rose by more than 500 basis points to 6.60 levels on Tuesday afternoon, following the Chinese central bank’s statement.

The offshore yuan, traded by international investors, was changing hands at 6.6818 to the US dollar at 4pm in Hong Kong, 508 basis points above its rate – 6.7320 – in the morning, which was 0.7 per cent lower than Monday’s close. It last traded below 6.70 on August 8, 2017.

The onshore yuan, traded on the mainland, recovered by 521 basis points to trade at 6.6647 at 4pm, up from 6.7168 per US dollar in the morning, which was 0.9 per cent lower than Monday’s close.

The sharp decline in morning trade has been attributed to traders betting on the Chinese central bank further weakening the yuan in preparation for an intensified trade conflict with the US. As of Tuesday morning, the offshore yuan had dropped for 14 consecutive days and was down by a total of 5.4 per cent from June 13. Its losing streak started the following day, after the PBOC opted not to follow the US Federal Reserve in raising interest rates.