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Yuan

China’s yuan tumbles to 6-week low and is tipped to fall further

Bankers have cited the strong US dollar and weaker Chinese economic data as the main reasons behind the weak yuan

PUBLISHED : Thursday, 12 November, 2015, 11:48am
UPDATED : Thursday, 12 November, 2015, 5:40pm

The onshore Chinese yuan hit a six-week low on Thursday after the People’s Bank of China set the mid-price weaker for the ninth day running.

Bankers say they expect the currency to depreciate further in the days ahead.

The onshore yuan closed at 6.3677, weaker by 0.01 per cent from Wednesday, after trading to as low as 6.3692, the lowest level since September 25, when it was at 6.3737.

The offshore yuan traded at 6.3958, also weaker by 0.01 per cent from Wednesday, after likewise hitting a six-week low at 6.3991.

Tommy Ong, managing director of treasury and markets at DBS Hong Kong, said the yuan had a chance to bounce back slightly in the near term but would weaken further in the medium term.

‘The weak yuan trading this week is related to the fact that the US dollar is trading strongly against other currencies with the expectation of the US interest rate rise next month,” Ong said. “However, we have seen other currencies have started to slightly bounce and that would lead the yuan to stop its depreciation.”

He said he did not believe the offshore yuan would drop through the 6.40 level, with his bank expecting it to remain at 6.42 through to the end of this year.

“Despite the singles day festival on Wednesday, which saw record-breaking online shopping by mainlanders, they may only be shifting to buying online from the traditional retail channels,” he said. “This does not reflect that retail spending has been growing substantially. Overall, the economic data released this month does not show China’s slow economy has strongly bounced back. The yuan is likely to remain trading at its current weak level in the medium term, between 6.30 to 6.40.”

The yuan has kept drifting lower, with bankers citing the strong US dollar and weaker Chinese economic data as the main reasons behind the weak yuan.

The People’s Bank of China set the mid-price at 6.3628, weaker by 14 basis points. The currency can trade up to 2 per cent above or below the daily mid-price fix.

The US dollar has remained strong against other currencies, especially with the US seen as likely to increase interest rates next month for the first time in a decade.

The euro traded against the US dollar at 1.0712, weaker by 0.29 per cent. The US dollar traded against the yen at 122.97, firmer by 0.09 per cent, the pound traded at 1.5186, weaker by 0.18 per cent, and the Australian dollar traded against the US dollar at 0.7143, stronger by 1.15 per cent.