Yuan declines as traders fear capital outflows to accelerate
Central bank strengthens currency for second straight day, setting mid-point rate at 6.7491 to the US dollar, up 71 basis points on previous fix
The Chinese yuan weakened on Thursday morning in both domestic and offshore markets, shrugging off a stronger fixing by the People’s Bank of China, as traders worried that capital outflows will continue to accelerate on increasing bets of a December rate rise by the US Federal Reserve.
The onshore yuan dropped 0.03 per cent in Shanghai to 6.7589 per US dollar by 11am. The offshore yuan also weakened 0.01 per cent to 6.7686 per US dollar in Hong Kong.
On Thursday, the People’s Bank of China strengthened the yuan for a second straight day, setting its mid-point rate at 6.7491 against the US dollar, up 71 basis points on the previous fix.
Overnight in the US, the Federal Reserve held interest rates steady at the end of its two-day meeting, but hinted it may increase rates in December.
“Provided the Fed stays on course for a December rate hike, and despite steady domestic economic data, capital outflows will continue to accelerate, and we should approach a year-end level of 6.80, all things staying equal,” said Stephen Innes, a senior trader at Oanda Asia-Pacific.