SHANGHAI: China’s yuan fell to a near 15-year low against the dollar on Tuesday, after the central bank fixed the official guidance rate at its lowest since the global financial crisis of 2008.
The yuan’s decline has extended into November after posting its eighth monthly loss in October, the longest monthly losing streak since 1994, when China unified market and official rates.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.2081 per dollar, the lowest since Jan. 24, 2008.
That was 313 pips or 0.43% weaker than the previous fix of 7.1768.
Currency traders took the official guidance’s breach of the key 7.2 per dollar level to mean that authorities would allow further yuan weakness.
The losses in the yuan came as the fixing was in line with market expectations, said a trader at a Chinese bank.
Official yuan midpoint fixings have been persistently set at firmer-than-expected levels since late August, with market participants interpreting it as part of the official attempt to stem fast yuan depreciation. Tuesday’s guidance rate was 11 pips softer than Reuters’ estimate of 7.2070.
The onshore yuan opened at 7.3201 per dollar and quickly touched 7.3280, the lowest since Dec. 26, 2007. It was changing hands at 7.3126 by midday, 76 pips weaker than the previous late session close.
The yuan’s weakness reflected recent US dollar strength, along with downbeat Chinese economic data and COVID disruptions, analysts at OCBC Bank said in a note.
The Federal Reserve’s aggressive monetary tightening has supported the greenback and US yields in recent months, and investors were eyeing a monetary policy meeting this week for fresh clues on the future pace of rate hikes.
“Tightening COVID prevention and temporary lockdown measures could raise more concerns over China’s economic growth,” the analysts added, noting the next supportive level for the yuan could be 7.4 per dollar.
China’s COVID-19 curbs forced the temporary closure of Disney’s Shanghai resort on Monday, while production of Apple Inc iPhones at a major contract manufacturing facility could drop by 30% in November because of coronavirus restrictions, a source told Reuters.
“Without easing COVID-related restrictions, the externally facing manufacturing sector is the sole provider of growth,” Stephen Innes, managing partner at SPI Asset Management.
“So a weaker yuan is a prerequisite to support exports amid fragile global demand.”
By midday, the global dollar index fell to 111.351 from the previous close of 111.527, while the offshore yuan was trading at 7.3339 per dollar.
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