SHANGHAI: China's yuan sank against the dollar on Wednesday as unexpectedly poor trade data for June sparked worries over the health of the world's second-largest economy.
The yuan's decline was all the more notable as the central bank had set a stronger midpoint for the currency's daily trading band with the dollar.
Spot yuan was trading at 6.1359 against the dollar at midday, down 0.1 percent from Tuesday's close of 6.1295 even though the People's Bank of China set the midpoint at 6.1652, a sharp rise of 0.13 percent from Tuesday.
Chinese exports fell by 3.1 percent in June from a year earlier, official data published on Wednesday showed, the first decline since January 2012, shocking a market that had previously expected a 4.0 percent rise.
The customs agency said exporters were losing confidence in face of weak overseas demand, rising labour costs and a strong yuan currency.
The PBOC had surprised the market by letting the yuan appreciate 1.5 percent in April and May.
"Signs are clear this year that the PBOC wants to quicken the pace to let the yuan rise as part of China's wider financial reforms," said a trader at a European bank in Shanghai.
"But the best time for China to let the yuan be revalued properly was during its peak of economic growth in 2002 to 2007. That phase is now over. The country will take a big risk if it embarks on radical currency reforms when its growth is on a weakening track."
The PBOC often appears to try to guide the yuan to stronger levels against the dollar during sensitive diplomatic events with the United States in order to deflect criticism that China has kept its currency artificially low in the past.
Top US and Chinese officials will meet in Washington this week for the annual US-China Strategic and Economic Dialogue, a process launched five years ago to help the world's two largest economies manage an increasingly complex relationship.
Comments
Comments are closed for this article.