Yuan hits three-month low after People’s Bank of China lowers reference rate amid trade war concerns

The yuan fell to its weakest level in over three months on Thursday, after the Chinese central bank lowered its daily currency reference rate. The move suggests authorities might be trying to limit the strength of the Chinese currency given China’s slowing economic growth and rising uncertainty from the ongoing US-China trade dispute.

The People’s Bank of China lowered the mid point for a fourth straight day on Thursday. Traders were allowed to trade up to 2 per cent on either side of the reference point, and in response the spot yuan fell to 6.3700 against the US dollar – its lowest level since January 14 – before retracing slightly higher to 6.3562.

Analysts said a weaker currency fix and recent moves by authorities showed China was moving to a neutral monetary policy stance from a tight one previously, in an apparent effort to counter the uncertainty caused by concerns over the ongoing trade dispute between Washington and Beijing.

The Chinese currency has appreciated by 0.1 per cent against the US dollar this year, the fourth strongest performer among the 11 most traded currencies in Asia. Against a basket of foreign currencies, the trade-weighted RMB CFET index has risen to a 11 month high of 96.99.