China's yuan weakened against the broadly stronger dollar on Monday, despite the central bank setting a stronger official guidance rate. The People's Bank of China set the yuan's midpoint rate at 6.1282 per dollar prior to market open, 0.15 percent stronger than the previous fix. The spot rate is currently allowed to trade 2 percent above or below the midpoint.
Last week was the first time since August that the yuan consistently traded below the midpoint, indicating the challenge the PBOC faces keeping the currency stable as many neighbours currencies weaken against the dollar. The trend continued on Monday with a spot rate that was 0.44 percent weaker than the midpoint. Yuan changed hands at the spot rate of 6.1549 at midday, down 0.08 percent.
The PBOC has resisted the temptation to guide the yuan lower to help boost soft exports and prop up the slowing economy. China's November exports missed expectations on Monday, and GDP growth is expected to slip to a 24-year low of 7.4 percent this year. In spite of this weak growth, China posted a record trade surplus of $54.5 billion for November. Analysts said the size of the surplus may increase pressure to strengthen the yuan. Critics, particularly in the United States, often cite large trade surpluses as a sign the yuan is undervalued.
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