China’s yuan trades weaker on Wednesday
Yuan was trading weaker on Wednesday after the Chinese central bank lowered the currency’s reference rate.
Onshore yuan in Shanghai was trading at 6.5346 to the US dollar, 0.27 per cent weaker than Tuesday. It hit a two-month low in intraday trading at 6.5349, its weakest level since March 3.
Offshore yuan in Hong Kong was trading at 6.5519, 0.07 per cent, or 47 basis points, lower than Tuesday.
The People’s Bank of China on Wednesday set the yuan reference point at 6.5216, 16 basis points, or 0.025 per cent, weaker than Tuesday. Traders are allowed to trade up to 2 per cent on either side of the reference point.
Stephen Innes, senior trader at Oanda Asia-Pacific, said new Chinese data showing persisting weakness in the economy is still fresh in traders’ minds.
“While the overall market risk reaction was muted, the data does heighten concerns that the Chinese economy continues to struggle,” said Innes in a report. “Price action has remained relatively quiet as the regional focus has again turned to US dollar and Japanese yen, with the debate over the outcome of this week’s G7 hogging the limelight.”
Innes said all eyes remain on the outcome of this week’s G7 meeting, which is likely to focus on intervention, tax cuts and the Bank of Japan introducing additional fiscal stimulus.
“The market is underpricing the risk of additional stimulus from the Japanese central bank and is not factoring in the central bank unleashing the mother of all stimulus packages,” said Innes. “So this week there is significant market risk from the G7.”