SHANGHAI: China’s yuan fell against the dollar on Monday, nearly touching its daily trading limit, as pressure builds amid a widening Sino-US yield gap, big capital outflows and growing worries about the Middle East conflict.
Overall, however, analysts expect the yuan’s fall to be contained by stepped-up stabilisation efforts from China’s central bank, which over the weekend pledged to prevent risk contagion in forex markets.
The onshore spot yuan was changing hands at roughly 7.3170 at midday, slightly softer than the previous late session close.
But the Chinese currency is 1.93% weaker than the midpoint - close to the 2% limit - after the People’s Bank of China (PBOC) set the guidance rate steady at 7.1792 per US dollar with a strong fixing bias.
The yuan’s weakness comes amid lingering concerns over China’s economy, and the widening US yield advantage over Chinese currency assets. The gap between US and China 10-year treasury yields widened to more than 226 basis points on Monday, the biggest in more than two decades.