SHANGHAI: China's yuan weakened against the dollar on Monday, after the central bank set its midpoint rate at the lowest level since November, which traders said signalled that monetary authorities intend to guide the currency mildly lower.
Before the market opened, the People's Bank of China set the midpoint at 6.1563 per dollar, than Friday's fix at 6.1533.
The spot market opened at 6.2651 per dollar and the yuan was changing hands at 6.2656 at midday, 27 pips weaker than the previous close and 1.78 percent softer than the midpoint. The spot rate is currently allowed to trade up to 2 percent above or below the official fixing on any given day.
The weakening came after China reported on Sunday that its trade surplus hit a record $60.6 billion in February, due to strong export growth and weak imports.
Traders said they suspected seasonal distortions of the February trade data due to the week-long Lunar New Year holiday in that month.
Strong trade surpluses might not continue as the yuan's real effective exchange rate (REER) is still high and monetary authorities are expected to roll out more easing measures to combat deflationary pressures, they said.
"The yuan is likely to fall steadily in the next couple of months," said a trader at a city commercial bank in Shanghai.
The offshore yuan was trading 0.21 percent weaker from the onshore spot at 6.2785 per dollar.
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