Onshore yuan strengthens for the first day in nine after China’s central bank props up currency with stronger fix and verbal warnings
- The currency advanced 0.3 per cent, halting an eight-session slide around 3 per cent
- The Chinese central bank set the fix at a stronger-than-expected level for the 26th straight session
China’s onshore yuan advanced for the first time in nine sessions, after the central bank issued a verbal warning against currency speculation.
The currency advanced 0.3 per cent, halting an eight-session slide around 3 per cent. The gains came after the People’s Bank of China late on Wednesday issued a strongly-worded statement saying that speculators will definitely lose money in the long term and key market participants need to “protect the authority of the fixing.” It also set the fix at a stronger-than-expected level for the 26th straight session.
The daily reference rate, Beijing’s most widely used tool to guide yuan expectations, has done little to arrest the currency’s weakness amid a surging dollar. For most of the past week, the onshore yuan currency has been trading close to the weak end of its 2 per cent trading band versus the US dollar, a sign that traders are sticking to their bearish bets on the yuan amid the dollar’s strength and as the local economy suffers from Covid-19 lockdowns and turmoil in the property sector.
The onshore yuan has fallen about 4 per cent against the US dollar this month and is on track for the worst annual loss since 1994. On Wednesday it fell to the weakest level since early 2008 and the offshore unit to a record low in data going back to 2010.
Commentary from local newspaper Securities Times also sought to calm market angst stemming from yuan’s weakness. The speed at which the yuan has depreciated against the dollar has actually been moderate compared to other currencies, and investors should view the moves with rationality, it said.
