Offshore yuan drops faster than onshore currency as trade war fears, central bank policies spook international investors
Onshore and offshore yuan fall to their lowest level in seven months on Friday after currency records its longest losing streak
The gap between the onshore and offshore yuan widened to 132 basis points on Friday, as the Chinese currency extended its losing streak against the US dollar to 12 days in a row – its longest losing period ever.
International traders are worried about the trade war, and they believe Chinese central bank policies are set to led the yuan lower
Both pools fell to their lowest level in seven months, but the offshore yuan – traded by international investors in Hong Kong – dropped more sharply than the onshore yuan, which is traded by mainland Chinese investors.
The sharper decline in the offshore yuan is a sign international investors are more gloomy about the outlook for the currency. The offshore yuan is trading weaker than the onshore yuan now, but before the currency started on its losing streak, the offshore yuan was trading stronger than the onshore yuan, and the spread between the two was only 68 basis points on June 13.
“The People’s Bank of China has more control over the onshore yuan market, while the offshore yuan is traded outside the country and is more market driven. The offshore yuan market is, thus, falling more than the onshore yuan, as international traders are worried about the trade war [between the United States and China], and they believe Chinese central bank policies are set to led the yuan lower,” said Jasper Lo, chief investment strategist at Hong Kong-based Eddid Securities and Futures.
The offshore yuan traded at 6.6521 against the US dollar on Friday morning, down 0.33 per cent from Thursday and 4.1 per cent from June 13, before its losing streak began. The onshore yuan traded at 6.6389 per US dollar on Friday morning, down 0.23 from Thursday and 3.8 per cent from June 13.