Yuan down on accommodative policy outlook

SHANGHAI: China’s yuan eased against the dollar on Tuesday, after a sharp bounce the previous day, pressured by underlying expectations that easier monetary policy at home and broad greenback strength will lead to more weakness in the local currency.

The yuan slumped to a four-month low on Friday, prompting a reassessment of its medium-term trajectory with many traders betting on more downside potential.

“I anticipate that USD/CNY could drift back towards the low 7.30s gradually over time,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

The PBOC needs to accommodate renewed dollar strength, but it will also continue to lean against volatility and ensure that FX moves are orderly, Tan said.