HONG KONG: China’s yuan weakened further on Wednesday against the US dollar, which hovered near a three-month peak as betting odds rose for former President Donald Trump to clinch a second term in November’s presidential election.
The firmer dollar and rising US bond yields kept up pressure on Asian currencies, including the yuan, even though Beijing stepped up efforts to rescue its economy.
Investors are still digesting the implications of Reuters news about a potential 10-trillion-yuan package of fiscal stimulus measures from Beijing.
The onshore yuan was 0.12% lower at 7.1363 against the dollar by 0400 GMT, after trading in a range of 7.1249 to 7.1368, close to a two-month low.
In the previous session, the yuan hit 7.1435, its weakest since Aug. 23.
Its offshore counterpart traded at 7.1499 yuan to the dollar, down about 0.1% in Asian trade, after breaking to the key resistance level of 7.15 per dollar in the morning trade.
On Tuesday, Reuters reported that China may approve the issuance of more than 10 trillion yuan ($1.4 trillion) in additional debt next week to bolster its fragile economy.
Assessing the economic impact of the potential package is not an easy task, given a lack of details and the complexity of fiscal issues, said Lu Ting, chief China economist at Nomura.
But overall the plan looks “not an impressive one”, he added, as a substantial part of it is accounted by a debt swap.
Investors are reluctant to make big bets amid uncertainty over the US elections ahead of a key Chinese leadership meeting from Nov. 4 to 8 that could reveal some details of the stimulus measures.
Growing bets for Republican presidential candidate Donald Trump to win the Nov. 5 election have provided support for the greenback, as his tariff and immigration policies are seen as inflationary.
China’s yuan down against dollar
UBS Research estimated the yuan could depreciate 5% to 10% if Trump becomes US president and imposed a tariff of 60% on Chinese imports.
Before the market opened, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a band of 2%, at 7.1390 per dollar, its weakest since Aug. 19 and 8 pips firmer than a Reuters’ estimate.
The currency is down 1.6% against the dollar this month, and 0.5% weaker this year.
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