Yuan starts 2017 weaker after PBOC cuts fixing by most in two weeks

Onshore yuan fell 6.6 per cent in 2016, the worst in more than two decades

PUBLISHED : Tuesday, 03 January, 2017, 10:33am
UPDATED : Tuesday, 03 January, 2017, 10:46am

Onshore yuan fell against the US dollar on the first trading day of 2017 after the People’s Bank of China (PBOC) weakened the currency’s fixing rate by the most in two weeks.

Yuan was changing hands on the spot market at 6.9549 per dollar as of 10.25am Tuesday, down 0.1 per cent from a close of 6.9450 in late night trade on Friday.

On Tuesday, the PBOC set the yuan’s mid-point rate at 6.9498 against the dollar, weaker by 128 basis points or 0.2 per cent from the previous fix. That’s the biggest change in two weeks.

The PBOC allows the yuan spot rate to move a maximum 2 per cent in either direction from its mid-price in daily trading.

In 2016, the onshore yuan lost 6.6 per cent against the greenback, marking the biggest annual drop since 1994.

However, the offshore yuan shook off early losses on Tuesday and rose 0.04 per cent to trade at 6.9722 per dollar at 10.25am.

China has moved to dilute the role of the dollar in its trade-weighted basket, cutting the dollar’s weighting from 26.4 per cent to 22.4 per cent and adding 11 another currencies from January 1, according to an earlier statement by China Foreign Exchange Trade System. The move was regarded as part of China’s efforts to stabilise the yuan.