Yuan falls for the 11th straight day as Chinese central bank girds itself for a trade war with the US
The PBOC continues to lower the currency in what analysts say may be an attempt to make exports more competitive as trade tensions escalate
The yuan fell for the 11th straight day on Thursday, taking its losses during the period to 4 per cent against the US dollar.
The offshore yuan traded at a fresh six-month low of 6.6300 per US dollar on Thursday morning, down 0.2 per cent from Wednesday and 3.8 per cent from June 13, just before its 11-day losing streak began.
It is becoming increasingly clear that global trade developments have weighed heavily on the yuan
The currency has tumbled every day since June 14, when the PBOC opted not to follow the US Federal reserve in increasing the interest rate. Its decline has also tracked the escalation in trade tension between the US and China.
The PBOC set the yuan’s midpoint at 6.5960 per dollar on Thursday morning, down 0.6 per cent or 391 points from Wednesday’s 6.5569, which itself was 0.6 per cent lower than Tuesday. The central bank has lowered the midpoint for the last seven days in a row, reducing it by 2.7 per cent. It is now down 3.1 per cent from June 14.
Lukman Otunuga, a research analyst at FXTM, a British foreign-currency trading company, said the PBOC’s tactic of lowering the official fixing of the yuan was an effort to cushion the effects of trade tariffs imposed by the US. Generally, a weaker yuan helps exporters by making their prices more competitive overseas.
“The yuan has weakened to its lowest level this year against the US dollar with prices punching above the 6.6000 level. It is becoming increasingly clear that global trade developments have weighed heavily on the yuan,” Otunuga said. “While the yuan could recover if trade tensions start to ease, any signs of escalating trade war fears are likely to pressure the currency.”