China Economy

Yuan falls for third day in a row in wake of weak mainland China trade data

Weak Chinese exports have also put downward pressure on the yen

PUBLISHED : Wednesday, 09 March, 2016, 11:43am
UPDATED : Wednesday, 09 March, 2016, 11:43am

The yuan fell for the third day in a row on Wednesday, with weak economic data leading to expectations the mainland authorities may come under more pressure to allow the currency to depreciate to help exports.

Offshore yuan traded in Hong Kong was quoted at 6.5182 per US dollar in early trade on Wednesday, weaker by 0.15 per cent from Tuesday, before bouncing back to 6.5155 at 10am. The yuan has depreciated 0.26 per cent against the greenback so far this week after rising 0.67 per cent against the US dollar last week.

The drop in exports has investors second-guessing themselves about the current risk rally
Stephen Innes, OANDA

It has weakened after mainland China said on Monday that its exports had fallen 25.4 per cent year on year in US dollar terms last month, the biggest fall in seven years and worse than market expectations of about 14 per cent. That had currency traders expecting the yuan to be led lower to help boost exports.

“The China trade data, particularly the drop in exports has investors second-guessing themselves about the current risk rally,” senior OANDA FX trader Stephen Innes said. “Traders are still thinking higher on USD/CNH, so it does take much to swing conviction when the market sentiment remains fragile.”

Innes said the weak Chinese export data had also put downward pressure on the yen, which was trading at 112.56 against the US dollar on Wednesday morning, weaker that Tuesday’s low of 112.40.

“The stock market and oil price also decreased due to weakening risk sentiment,” he said. “The USD/JPY declined with the negative market. It could be difficult to change this risk sentiment. The weak dollar-yen and Nikkei will soften each other and the negative spiral is expected to continue.”

The People’s Bank of China set the yuan’s daily reference rate at 6.5106 on Wednesday, weaker by 65 basis point from Tuesday, when it set the mid-price at a two-month high of 6.5041 per US dollar. The PBOC allows the yuan to be traded 2 per cent in either direction of the mid-price.

Onshore yuan weakened by 0.16 per cent to trade at 6.5146 per US dollar at 10am on Wednesday.

The PBOC set the mid-price of the yuan against the euro at 7.1612, stronger by 77 basis points, at 5.7843 against 100 yen, weaker by 443 basis points, and at 9.2497 to the pound, stronger by 285 basis points.

The Hong Kong dollar traded at 7.7664 per US dollar at 10am on Wednesday, weaker by 0.02 per cent.