HONG KONG/SHANGHAI: Investors' nervousness over clashes between police and pro-democracy protesters in Hong Kong forced the China's yuan currency to its weakest level in over a week in Hong Kong trading.
The yuan's weakness offshore was transmitted to the onshore market, where the yuan was dragged away from a six-month high hit late last week, as Hong Kong experienced its worst unrest since China took back control of the former British colony in 1997..
Offshore spot yuan struck its weakest level since Sept. 18 as it dropped to 6.1551 per dollar by around mid-morning, down from Friday's close of 6.1463.
"We saw some positions being taken out in panic in New York trading on Friday, and there is some consolidation today, but markets are very choppy," said a flow trader at an European Bank in Hong Kong.
The drop in the offshore yuan also was due to weakness in the Hong Kong dollar, which suffered its biggest single day drop at least since early February 2014.
The currency's fall came alongside a drop in the stock market which fell by more than 2 percent to a 2-1/2 month low on Monday with a sub-index of property stocks in Hong Kong diving by more than 4 percent.
The sudden weakness in the Hong Kong dollar and the offshore yuan comes after weeks of sustained inflows into the local currency markets ahead of a landmark stock market connect scheme to be launched in October between the Honk Kong and Shanghai bourses.
The offshore yuan's discount to the onshore yuan moved to around 200 pips -- its widest in two weeks.
In the onshore market, which usually shows only muted reaction to offshore events, spot yuan weakened to 6.1353 per dollar, down from 6.1270 at Friday's close.
The move also reflected the People's Bank of China (PBOC) setting a weaker daily midpoint fixing at 6.1539 yuan per dollar, down from Friday's 6.1508, as the dollar index surged in global markets.
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