UpdateChina’s offshore yuan falls sharply Friday to end three day winning streak
Traders believe yuan will continue to decline next week when mainland Chinese financial markets reopen after Lunar New Year holiday
China’s offshore yuan fell sharply on Friday after hitting a two-month high the previous session, with traders saying the downward trend for the currency may continue as they believe its rebound this week was overdone.
The offshore yuan once traded at 6.5484 to the US dollar in early trade on Friday, down 0.3 per cent from Thursday when it hit a two-month high of 6.5272. The fall ended a three-day winning streak for the currency. The offshore yuan traded at 6.5366 at 5 pm.
Most of the running in the yuan has been in overseas markets such as London, Singapore and New York because Hong Kong was closed from Monday to Wednesday for the Lunar New Year.
The currency, which has strengthened 0.51 per cent against the US dollar this week, has risen five weeks in a row. After the People’s Bank of China’s (PBOC) intervention in January, the offshore yuan has now turned around from depreciating more than 2 per cent in the first week of January to its current 0.48 per cent year-to-date gain against the US dollar.
Heng Koon How, senior currency strategist with Credit Suisse, said the strengthening of the offshore yuan this week was due to a weaker US dollar rather than action by the PBOC.
“Trading volume was relatively light this week, so I doubt there is any meaningful intervention from the PBOC,” Heng said.