China’s yuan continued to trade weaker ahead of its SDR inclusion, but the currency is showing signs of stability.
On October 1, the International Monetary Fund will confer the stamp of recognition on China’s status as a key global financial system player by adding the Chinese yuan as its fifth Special Drawing Right (SDR) currency.
Onshore yuan (CNY) in Shanghai traded at 6.6700 to the US dollar at 3.05pm on Friday, 0.07 per cent or 49 points weaker than on Thursday. However, CNY recorded the smallest quarterly drop over the previous year, down 0.36 per cent or 239 points in the latest three months, much narrower than the second quarter decline of 3.07 per cent or 1,979 points.
Offshore yuan (CNH) in Hong Kong on Friday also traded lower at 6.6804, 0.16 per cent or 105 points lower. On a quarterly basis, CNH volatility is also easing. In the third quarter, CNH weakened 0.17 per cent or 114 points, recording the smallest quarterly drop over the past year and a half. CNH performance in the third quarter was greatly improved from its decline of 3.17 per cent or 2,050 points in the second quarter.
The People’s Bank of China on Friday set the yuan reference point against the US dollar at 6.6778, 78 basis points or 0.117 per cent weaker than on Thursday. Traders are allowed to trade up to 2 per cent either side of the reference point for the day.
“We expect SDR inclusion to provide a modest but not significant uplift to Chinese yuan asset