SHANGHAI: China’s yuan currency extended its downtrend against the dollar yesterday to touch a 16-month low, despite the country’s central bank fixing its trading point for the unit at a higher level.
The unit fell to as low as 6.2466 to the dollar, its weakest level since December 2012. But it closed at 6.2373, only slightly weaker than Tuesday’s close of 6.2370, according to the China Foreign Exchange Trade System.
The People’s Bank of China had set the mid-point for trading at 6.1599, compared with 6.1610 on Tuesday. The PBoC keeps a grip on the currency but allows it to move up or down two percent on either side of a daily-set point.
The yuan has fallen repeatedly in recent months, with many dealers believing the depreciation is a deliberate move
by the central bank to target speculative funds betting on continued rises. But traders have also blamed the slowing economy as a crucial factor.
A Shanghai-based local bank trader said: “This round of yuan falls are mainly driven by
investors spontaneously purchasing dollars instead of the
central bank’s intervention, so we may see it slowly weakening towards 6.26 in the coming weeks.”
Policymakers have pledged to move gradually towards full convertibility of the yuan, allowing it to be freely bought and sold, and bringing with it the uncontrolled movement of funds in and out of China. The unit, which is also known as the renminbi, has fallen more than three percent so far this year, erasing gains of the amount in 2013.
“The depreciation... since mid-February has to some extent defied market expectations for one-way appreciation, so now expectations towards the renminbi are divided,” Jiang Shu, a foreign exchange analyst with Industrial Bank, said.
“Expectations towards the domestic economy will certainly affect renminbi prices, but the impact should not be overestimated,” he said.AFP