China's yuan falls on fresh 4-1/2 year low midpoint, more weakness seen

SHANGHAI: China's yuan closed weaker against the dollar on Tuesday after the central bank again set the midpoint at its lowest level in more than four years, and traders anticipated the currency will fall further.

"The yuan was trading narrowly intraday, as the authorities appeared to want to control the pace of its depreciation," said a dealer at a foreign bank in Shanghai.

Every day during the past week, the yuan has edged down around 100 pips at the open. According to the dealer, this has prompted some state-owned banks to start to offer dollars, which caused the currency to move within a narrow range intraday.

The yuan has weakened for eight consecutive sessions.

Prior to Tuesday's market opening, the People's Bank of China (PBOC) set its official midpoint rate at 6.4559 per dollar, its weakest level since July 2011, and 0.1 percent weaker than the previous fix of 6.4495.

The spot yuan opened at 6.4640 per dollar and closed at 6.4610, or 0.03 percent weaker than the previous close.

It firmed to 6.4564 in afternoon trade from the midday level around 6.4660, but then eased.

The PBOC said on Friday that it had begun publishing a yuan exchange rate weighted against a basket of currencies, a move that will eventually loosen the Chinese currency's link to the greenback and will let the yuan weaken further.

This yuan index covers 13 currencies, with the dollar given a weighting of 26.4 percent, the euro 21.39 percent and the Japanese yen 14.68 percent.

By the end of trading on Tuesday, the yuan stood at 7.1298 against the euro, weaker than the previous close of 7.0806, and slightly softer against the yen at 5.3468.

Offshore, the yuan was trading 1.24 percent weaker than the onshore spot at 6.5420 per dollar.

Chinese leaders, meeting ahead of an agenda-setting conference, pledged on Monday to keep the country's economic growth in a "reasonable range" in 2016 by expanding domestic demand and making supply-side improvements.

Beijing has been struggling to reach its economic growth target of around 7 percent this year, despite a raft of policy easing steps in recent months.