Yuan sinks to fresh eight-year low as investors watch for PBOC reaction
China’s central bank on Monday set the daily fixing lower for a 12th straight trading day, at 6.8985
The yuan continued to sink on Monday, falling to its lowest level since June 2008, after China’s central bank cut the reference rate for the 12th consecutive trading day.
Offshore yuan traded in Hong Kong weakened 0.14 per cent from Friday’s close to trade at 6.9100 as of 11.20am, the lowest level since the offshore market was launched in 2010.
Onshore yuan traded in Shanghai also slumped 0.13 per cent to trade at 6.8963, the lowest level since June 2008.
China’s central bank on Monday set the daily fixing 189 basis points weaker at 6.8985. Trading is allowed up to 2 per cent either side of the reference point for the day.
Stephen Innes, a senior trader at OANDA, said the yuan was approaching the psychologically important level of 7 yuan per US dollar and traders would be carefully watching the People’s Bank of China’s reaction to the test of that point.
“Predictable rumblings from Chinese policy makers are making the rounds, suggesting that the 7.00 level will be the next ‘line in the sand’,” he said.
“Up until now, the PBOC has been unperturbed about the sliding yuan, but may be concerned about the rapid pace of the depreciation enough to ‘pump the brakes’. That said, a break of 7.0 may be tolerable, but may force the PBOC into smoothing action to better control a yuan slide.”
On Friday, the US dollar hit a 13-year high, with investors expecting faster inflation and higher interest rates under new President-elect Donald Trump.
The yuan has been dropping more steeply since Trump’s surprise victory, after the real estate mogul called for trade tariffs on China and labelled the country a currency manipulator during his campaign.