Yuan Weakens Past Key Support Level as Depreciation Quickens
The People’s Bank of China previously set its daily fixing at stronger levels than expected when the yuan neared 7.125.
(Bloomberg) -- China’s yuan is coming under pressure after it weakened past a support level that had held for the past two weeks.
The currency fell as much as 0.41% on Thursday to depreciate past 7.125 per dollar for the first time since October, before paring losses. Analysts cited demand for greenbacks and concern over the country’s export outlook as reasons for the declines.
Sentiment is turning more bearish in China as the central bank limits stimulus and the global economy falters. Against a basket of 24 trading partner currencies, the yuan fell for seven straight days through Wednesday, while the CSI 300 Index of shares trailed MSCI Inc.’s global benchmark by the most since 2015 last week.
There are signs the central bank will seek to limit further declines. The People’s Bank of China previously set its daily fixing at stronger levels than expected when the yuan neared 7.125. Chinese banks also helped the currency strengthen by selling dollars.
“The yuan trading weaker than 7.1 indicates souring sentiment and may make the PBOC less comfortable,” said Ken Cheung, chief Asia currency strategist at Mizuho Bank Ltd. “If market forces could not guide the yuan back to near 7.1 at the market close in Asia, we may see a firmer fixing tomorrow.”
The yuan last traded down 0.06% at 7.1033.
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