Yuan weakens despite People’s Bank of China fixing currency higher
Decline against US dollar extends to fourth day
The yuan pulled back after a strong opening on Monday as the People’s Bank of China (PBOC) set the daily fixing higher.
Onshore yuan traded in Shanghai dropped 0.13 per cent to 6.5055 against the US dollar at 5.05pm on Monday. The currency strengthened to an intraday high of 6.4951 earlier before weakening in late trading, extending its decline for a fourth consecutive day.
In intraday trade on Thursday the rate touched 6.5092, the lowest for a month. The yuan was down 0.36 per cent last week, its biggest weekly fall in three weeks.
Offshore yuan in Hong Kong traded at 6.4950 per US dollar in early trade on Monday morning before sliding 0.08 per cent to 6.5192 per US dollar by 5.05pm. The currency last week fell by 0.44 per cent, its biggest weekly decline in six weeks.
Jasper Lo, the chief executive of King International Financial, said the yuan strengthened on Monday morning because the US dollar weakened against the other currencies since Friday.
“The US jobs data released last Friday was worst than expected which has led to a fall of the US dollar. This, added together with the PBOC set the yuan fixing stronger on Monday morning, has led the yuan to rise this morning,” Lo said.
He however said the yuan started to soften in the late afternoon after both the Shanghai and Shenzhen stock markets fell as a result of poor economic data from the mainland.
“Investors are still worrying about the Chinese economic slowdown. The yuan may strengthen a bit but the outlook would remain weak,” he said.
The strengthening of the yuan came after the PBOC on Monday morning set the mid-price at 6.5105 to the US dollar, 97 basis points or 0.15 per cent stronger than last Friday midprice at 6.5202. This turned around the trend of the central bank that fixed the yuan lower against the greenback amid the stronger US dollar against other currencies last week.
On a weekly basis, the central bank has devalued the yuan daily fixing by 0.95 per cent, the biggest weekly slump since the one-off devaluation of 2 per cent in August last year.
China has not yet let the yuan become freely floated but the central bank sets a mid-price for the currency every morning and traders are allowed to deal in a 2 per cent range on the reference price.
