PBOC guides yuan to a fresh 5-year low against the dollar
Mid-point rate set at 6.6594, with analysts now predicting 6.8 soon
The People’s Bank of China on Tuesday guided the yuan to its lowest level against the US dollar since 2010, triggering a further slide in the onshore rate which fell to a fresh five-year low in Shanghai.
The PBOC set the yuan’s mid-point rate at 6.6594 per US dollar, down 122 pips (percentage in point) from the previous fixing of 6.6472.
It also marked the weakest level for the reference rate since December 2010.
In Shanghai, the onshore yuan extended losses from the previous day and softened 0.06 per cent to 6.6691 versus the US dollar at 11.50am.
Earlier, the currency touched 6.6695, also the weakest level seen in more than five years. As of Friday, the yuan had fallen for four consecutive weeks.
In Hong Kong, the offshore yuan also declined, trading down 0.11 per cent to 6.6817 per US dollar.
Analysts from UBS said the Chinese currency has come under renewed depreciation pressure in the aftermath of the UK referendum, which has triggered greater economic uncertainty and volatility in the forex market.
“The USD/CNY will likely arrive at 6.8 earlier than we previously envisaged – even though we still do not expect it to trade beyond 6.8 by the end 2016,” said Ning Zhang, who led a group of UBS analysts in a recent research note.
The UBS team said it expected the yuan’s weakness against the US dollar to continue, revising their end-2017 forecast to between 7 to 7.2 from 7 previously.