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Currencies

Yuan falls as dollar strengthens after robust US jobs report

Onshore yuan weakens 0.02pc to 6.6625 against the greenback, offshore yuan also falls 0.02pc to 6.6699

PUBLISHED : Tuesday, 09 August, 2016, 1:30pm
UPDATED : Tuesday, 09 August, 2016, 1:30pm

The yuan dropped against the US dollar in both onshore and offshore markets on Tuesday, despite the People’s Bank of China guiding the currency stronger, as analysts expected further weakness on the back of a stronger greenback following robust US jobs numbers.

The PBOC set the yuan’s Tuesday mid-point rate at 6.6594 per US dollar, stronger by 21 pips (percentage in point) from the previous fix.

The onshore yuan weakened 0.02 per cent to trade at 6.6625 per US dollar, while the offshore yuan also fell 0.02 per cent to 6.6699.

“Given continued capital outflow pressures and the likelihood of further USD strength, we see further depreciation pressure to come for the CNY,” said Tao Wang, an analyst for UBS.

We expect increased two-way volatility, and caution investors to be mindful of potentially sensitive dates including the G20 summit, RMB’s formal SDR inclusion, the US election and the Fed’s expected hike in December
Tao Wang, UBS analyst

The US dollar has strengthened against most major currencies after an upbeat jobs report released on Friday fuelled expectations of a Federal Reserve rate hike later this year.

However, Wang said the Chinese central government may not let the yuan depreciate beyond 6.8 against the greenback, as they want to effectively manage expectations and any potential political backlash from its trading partners.

“We expect increased two-way volatility, and caution investors to be mindful of potentially sensitive dates including the G20 summit, RMB’s formal SDR inclusion, the US election and the Fed’s expected hike in December,” she said.

The next G20 summit is set to take place in early September in Hangzhou, China.

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