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Currencies

Chinese yuan mixed as British pound weakens ahead of Brexit vote

PUBLISHED : Wednesday, 22 June, 2016, 12:01pm
UPDATED : Wednesday, 22 June, 2016, 12:01pm

Chinese yuan saw mixed trading on Wednesday while the British pound traded lower ahead of the Brexit vote.

The offshore yuan in Hong Kong weakened at 10.45am on Wednesday, down 0.03 per cent or 18 pips to 6.5947 per dollar. The onshore yuan in Shanghai climbed 0.05 per cent or 35 basis points to 6.5847 per dollar.

The People’s Bank of China set the mid point of the yuan against the US dollar at 6.5935 on Wednesday morning, weaker by 279 basis points, or 0.42 per cent.

Stephen Innes, senior trader at Oanda Asia Pacific, said the “prospects of mainland commercial banks trading in offshore foreign exchange markets” was a topic discussed in a People’s Bank of China meeting. However, the rules are opaque and no timeline was given for the implementation.

“We should expect a convergence inspot rates of onshore yuan and offshore yuan over time,” Innes said in a report. “This shift in policy is a massive step for opening up mainland markets and will provide investors and multinational corporations with greater transparency surrounding China’s foreign exchange policies.”

The British pound shed 0.25 per cent to trade at US$1.4682 as of 10.45am, the day before Britain votes whether to leave or remain in the European Union. On Monday it jumped over 2 per cent and at one stage hit US$1.4717, the highest level since January, as latest polls suggest the UK will more likely vote to remain in the EU.

Trading in the pound was volatile, following the movements of UK polls on the Brexit vote.

US Federal Reserve Chairwoman Janet Yellen cautioned that the UK leaving the EU posed a risk, while new polls showed support for the “remain” camp growing.

Yellen also said US growth had picked up noticeably in the second quarter after a weak start to the year, but added that it had been uneven and downside risks remain.