Yuan bounces back after PBOC sets reference price higher
Other major currencies flat, as traders await US interest rate decision
The Chinese yuan strengthened in Tuesday morning trade after hitting a one-month low on Monday.
But analysts are now warning that a rise in US interest rates could put further pressure on the currency.
The yuan rose after the People’s Bank of China set its daily reference rate against the US dollar at 6.6586, 0.1 per cent or 66 basis points higher on Monday when it was set 441 points, or 0.67 per cent lower, the biggest cut the central bank has made since August 11 last year, when it cut the level by almost 2 per cent.
The PBOC allows the yuan to be traded 2 per cent in either direction of the mid-price and traders use that as a guidance for the direction of the yuan.
Both onshore and offshore yuan bounced back on Tuesday morning after they had fallen to a one-month low of 6.6744 on Monday afternoon. Offshore yuan traded in Hong Kong was quoted at 6.6614 to the US dollar in earlier trade before bouncing back to 6.6533 by 11am, stronger by 0.11 per cent.
Onshore yuan traded in Shanghai strengthened by 0.03 per cent to 6.6456 to the greenback. It had fallen to one-month low of 6.6659 on Monday.
Jasper Lo Cho-yan, chief executive of King International Financial, said the yuan’s outlook remain weak.
“The US will have the Jackson Hole meeting this Friday where US Federal Reserve chairwoman Janet Yellen will talk about interest rates. If the US does increase its interest rates in September, the yuan could be under pressure to fall even further,” Lo said.
The other currencies remain flat as market watchers sat on the fence in anticipation of the US rates announcement.
The US dollar to the Japanese yen stood at 100.24 at 11am, edging down 0.09 per cent, while a pound was worth US$1.3135, down 0.02 per cent.
The Hong Kong dollar remained on the strong side of the peg that it is trading at 7.7536 to the greenback at 11am, just shy away from this year’s high of 7.7503 on January 4.