Yuan falls to over a 3-month-low on likelihood of a US interest rate rise
People’s Bank of China sets reference rate lower.
The Chinese yuan fell to more than a three-month low on Tuesday morning after the central bank set the reference rate slighter lower and the market sees the currency remaining under pressure because of an expected US interest rate rise next month.
The onshore yuan in Shanghai traded at 6.5573 against the US dollar early on Tuesday morning, 0.06 per cent below its close on Monday. That is the lowest level since February 5. The currency later strengthened to 6.5526 by 10.45 am.
The onshore yuan has weakened by 1.21 per cent this month against the US dollar and is down by 0.92 per cent this year.
Jasper Lo, chief executive of King International, said the recent weak economic data on the mainland and the strengthening of the US dollar has caused the yuan to weaken.
“It is not a surprise to see the yuan fall against the US dollar and go further down as mainland economic data in April was not good. In addition, it appears it is highly likely the US will increase the interest rate in June. These have all added pressure to the yuan,” Lo said.
An official of the US Federal Reserve — central bank to the world’s largest economy — on Monday indicated the country would increase interest rates two to three times this year. That has sent both the US and Hong Kong stock markets lower.