Onshore yuan falls for fifth straight week

PUBLISHED : Friday, 08 July, 2016, 11:46am
UPDATED : Friday, 08 July, 2016, 11:46am

The yuan softened versus the US dollar in Shanghai on Friday morning, looking likely to extend its five-week losing streak, as traders said the Chinese central bank has taken advantage of Brexit to let the currency drop further to boost exports without triggering any rush in capital flows.

The onshore yuan traded at 6.6874 per US dollar at 11.25am, weaker by 0.08 per cent from the previous close, according to data from Bloomberg. So far, it has fallen approximately 2 per cent during the past five weeks.

However, the offshore yuan rose 0.04 per cent in Hong Kong to 6.6982 per US dollar.

On Friday, the People’s Bank of China guided the yuan lower, setting its mid-price against the US dollar at 6.6853, weaker by 33 pips from the previous fixing.

The PBOC has found a happy spot in the wake of the Brexit fall out
Stephen Innes, Oanda Asia Pacific

“The PBOC has found a happy spot in the wake of the Brexit fall out,” said Stephen Innes, a senior trader at Oanda Asia Pacific, noting that the US dollar has surged against a number of other currencies on safety demand after the UK referendum rattled global markets.

“Not only has the renminbi casually retreated, but it has done so without any sense of panic nor ignited any rush in capital flows,” he added.

The latest data on capital outflows and FX reserves have been “reassuring”, said Capital Economics analyst Julian Jessop.

China’s FX reserves posted a surprise increase to US$3,205 billion at the end of June, up by US$13 billion from a month earlier. That compared with a forecast fall of US$20 billion in a Reuters poll of analysts.

However, Jessop warned that any further slide in the yuan could revive fears about depreciation and lead to another upsurge in capital outflows.