SHANGHAI: China’s yuan weakened to a one-month low against the dollar on Wednesday, weighed down by growing market expectations of further monetary easing in the world’s second largest economy.
Market participants have largely priced in a reduction to policy rates in the near term after major Chinese lenders lowered deposit rates late last year. Bets of further stimulus ratcheted up after Zou Lan, monetary policy department head of People’s Bank of China (PBOC), highlighted reserve requirements as one of monetary policy options to support credit growth.
The central bank continued its months-long trend of setting the official guidance rate at levels firmer than market projections, traders and analysts said, a move widely seen as an attempt to prevent the yuan from falling too rapidly.
Wednesday’s midpoint was 563 pips firmer than a Reuters estimate of 7.1618.
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