China’s yuan hits fresh lows, continues descent past 6.9 against greenback

People’s Bank of China sets reference point for Thursday at 6.9085 against the US dollar

PUBLISHED : Thursday, 24 November, 2016, 11:08am
UPDATED : Thursday, 24 November, 2016, 11:08am

China’s yuan hit fresh lows on Thursday morning as the People’s Bank of China continues to devalue the currency, raising expectations that it could be trading at 7 to the dollar by year-end.

Onshore yuan in Shanghai was trading at 6.9196 to the dollar at 10.20am, 0.01 per cent weaker than the 6.9190 close at the end of trading on Wednesday.

It marks a new low this week, and the lowest point since early June 2008.

Offshore yuan in Hong Kong traded at 6.9566 to the dollar at 10.20am, a fresh low, and 0.03 per cent weaker than Wednesday’s 6.9545.

The central bank on Thursday set the yuan reference point against the US dollar at 6.9085, 181 basis points or 0.26 per cent weaker than on yesterday.

Traders are allowed to trade up to 2 per cent either side of the reference point for the day.

Stephen Innes, senior trader at OANDA, told the Post he now expected the yuan to trade at 7 to the dollar by the end of the year.

“I’m not going to get excited until it hits 7,” he said.

He said the yuan was falling on the US dollar’s continual rise, although mainland China often had a “psychological issue” with the connection between the currencies, and he didn’t see the US dollar’s momentum abating.

There had been heavy capital outflows due to the low yuan, and Innes warned: “If we don’t temper this exodus in some respect, I think it would be a free-for-all as we get into year-end.”

On Wednesday, the US dollar rose to its highest level since March 2003, pushed up by positive US economic reports that reinforce expectations of interest rate hikes next month.

The British pound also got a boost against the euro and the dollar, as Chancellor Philip Hammond announced increased spending in infrastructure and innovation.

The euro, which faces a raft of political risks including elections in France and Germany, continued to slide after touching a 19-year low.