Yuan weakens ahead of October foreign exchange reserves data

The yuan softened on Monday morning after the central bank cut its reference rate by the most in more than two weeks, amid expectations that data released later today will show the country’s foreign exchange reserves declined further in October.

Offshore yuan traded in Hong Kong traded 0.13 per cent weaker at 6.7825 per US dollar as of 10.04 am on Monday. Onshore yuan was down 0.25 per cent at 6.7706 a dollar.

The People’s Bank of China cut the yuan’s daily reference rate by 211 basis point to 6.7725, the biggest reduction in over two weeks. The central bank allows the currency to be traded 2 per cent either side of the reference rate.

The CFETS RMB index, tracking the yuan’s rate against a basket of trade-weighted currencies, fell to 93.78 last Friday, 0.37 points lower than the previous week, according to data from the China Foreign Exchange Trading System.

The market is waiting for the headline foreign exchange reserves to be released today, with most analysts expecting further declines.

Heightened expectations of further depreciation in the yuan will continue to put pressure on outflows, said Larry Hu, an analyst at Macquarie Capital Limited in Hong Kong.