Offshore yuan weakens, breaking four-day winning streak

PUBLISHED : Monday, 01 August, 2016, 3:52pm
UPDATED : Monday, 01 August, 2016, 10:56pm

Offshore yuan traded in Hong Kong fell the most in two weeks, breaking a four-day winning streak, weakening 0.2 per cent to 6.6450 per US dollar as of 6:40pm Monday, after a gain of 0.46 per cent on Friday.

Onshore yuan in Shanghai also saw a correction, closing Monday’s trading almost unchanged at 6.6390 against the US dollar, after extending gains in the morning amid a softer US dollar on diminished expectations of an interest rate rise by the US Federal Reserve.

The currency was down despite the fact that the People’s Bank of China raised the yuan’s reference rate by 234 basis points on Monday to reflect a lower US dollar index, the biggest increase since June 23.

The US dollar index, a gauge for the strength of the greenback, was up 0.12 per cent as of 6:45pm Monday in Hong Kong, after dropping 1.17 per cent on Friday, following figures showing the US economy expanded 1.2 per cent in the second quarter on an annualised basis, significantly lower than market expectations.

China’s manufacturing PMI came in at 49.9 in July, down from 50 in the previous month, according to data released by the National Bureau of Statistics on Monday.

Disappointing July official PMI data hits China’s stock markets but Hong Kong shrugs it off

In contrast, China’s Caixin manufacturing PMI, which mainly tracks small and medium-sized businesses, surprised the market by rising to 50.6, printing above 50 for the first time since February 2015.

In a related development, the World Bank is planning to sell a Special Drawing Rights bond of as much as 500 million SDR units in China’s interbank market, according to people familiar with the offer. The tenor may be three years, the people said.