China’s yuan rebounds from Monday’s fall to 1-month low

PUBLISHED : Tuesday, 10 November, 2015, 11:58am
UPDATED : Tuesday, 10 November, 2015, 12:11pm

Chinese yuan bounced back on Tuesday morning after hitting a one month low on Monday but bankers believe the currency still face depreciation pressure in the near term.

The onshore yuan at 11:15 am traded at 6.3588, up 0.07 per cent from the Monday close when it has hit by market concerns on the slow progress of the International Monetary Fund decision to let the currency join its Special Drawing Rights basket.

The basket is now comprised of the US dollar, yen, euro and pound and China is keen to get the yuan added to raise its status as an international reserve currency.

The offshore yuan also bounced back slightly by 0.03 per cent to 6.3885 to the dollar.

The People’s Bank of China set the mid-price at 6.3602, down 24 basis points from Monday when it weakened the currency by 119 basis points.

Tommy Ong, managing director of treasury & markets of DBS Hong Kong, said the yuan faced depreciation pressures ahead.

“The US interest rate rise expectation in December is so strong now that all other currencies including the yuan has depreciation pressure. In addition, the mainland economy is likely to slow down in the next five years,” Ong said.

“All of these factors has led the yuan to be weaker from last year. But I think the depreciation levels would not be substantial because China still has strong trade reserves which could support the yuan.”

Ong expects both onshore and onshore yuan would weaken to around the 6.42 level by the end of this year.

The US dollar remained strong against other major currencies as the economic data now showed the US Fed looks highly likely to increase interest rates next month, which will be the first rate rise in a decade.

At 11:30 am, the euro was trading against the dollar at 1.0749, weaker by 0.03 per cent, the pound against the dollar weakened to 1.5113, down 0.01 per cent. The Japanese yen however bounced back slightly with the US dollar to trade at 123.15 against the yen, lower by 0.03 per cent.