HONG KONG: China’s yuan weakened against the U.S. dollar for a second straight session on Thursday, pulling away from a six-month high hit earlier this week with traders reporting that state banks were engaged in strong dollar buying in early deals.
Market participants also noted that the People’s Bank of China (PBOC) set a weaker-than-estimated fixing on Wednesday for the first time since November, adding to the view that authorities do not want a sharp yuan rally.
Onshore yuan was 0.08% lower at 7.2151 to the dollar as of 02:49 GMT.
Its offshore counterpart stood at 7.2119 yuan per dollar, little changed in Asian trade.
These moves coincide with broad strengthening pressure on Asian currencies. Talks between Seoul’s deputy finance minister and U.S. Treasury officials on foreign exchange have spurred bets of prolonged dollar weakness.
“Despite sharing some characteristics with other Asian exporting power houses, including substantial Dollar asset exposure, we still think China’s policy preference will be for a measured and controlled move in USD/CNY,” Goldman Sachs analysts said in a client note.
China’s yuan falls from six-month peak on rising dollar demand
Spurred on by Beijing and Washington’s agreement to slash the tariffs, the yuan strengthened past 7.2 to a six-month high of 7.1855 on Tuesday.
On Thursday, the midpoint rate, around which the yuan is allowed to trade in a 2% band, was set at 7.1963 per dollar, stronger than estimates.
The dollar index stood near 101, struggling to extend strong gains made at the start of the week, as investor relief at the U.S.-China tariff truce gives way to a cautious mood amid uncertainty over the shape of various trade deals.
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