More stable yuan expected in September following big fall in August
After its biggest devaluation in two decades in August, currency traders expect the yuan will become more stable in September ahead of President Xi Jinping’s meeting with US President Barack Obama.
The onshore yuan (CNY) was at 6.3760 to the US dollar at Monday’s close, down 2.68 per cent from 6.2097 on July 31, making it one of its largest monthly depreciations.
The offshore yuan (CNH) dropped even further – by 3.62 per cent – in August to trade at 6.4455 yesterday, compared with 6.2205 on July 31.
Beijing surprised the market by devaluing the yuan by almost 2 per cent on August 11 and changing the fixing mechanism for its mid-price for traders to make it more market driven. This led to the onshore yuan hitting a four-year low of 6.4486 on August 12, while the offshore yuan also weakened to 6.5943 on the same day. The devaluation is believed to be strategy adopted by Beijing to try to boost exports and the mainland’s slowing economy.
Volatility in FX markets may take a breather as the focus reverts back to the US Federal Reserve
Many traders believe the yuan will become more stable in September, for a variety of reasons.
“Ahead of Victory Day celebrations in China on Thursday (September 3), the authorities are likely to do their utmost to bring stability to both the exchange rate and the stock market,” French lender Societe Generale said in a report on Monday.