- The yuan was changing hands at 7.0044, 64 pips weaker than the previous late session close.
- The dollar stood tall over the languishing euro and heavily sold exporter currencies on Wednesday, with the dollar index trading at 99.435 as of midday.
SHANGHAI: China's yuan eased to a two-week low on Wednesday after the central bank set its official midpoint weaker than a key threshold for the first time in nearly two months.
Investors also remained cautious as the death toll from the coronavirus epidemic passed 2,000, though the number of new cases fell for a second straight day.
Prior to the market opening on Wednesday, the People's Bank of China (PBOC) set the midpoint rate at 7.0012 per dollar, 186 pips or 0.27pc weaker than the previous fix of 6.9826.
It was the first time the PBOC has set the official guidance rate below the closely watched 7 per dollar level this year, and the level was the weakest since Dec. 25.
Traders and analysts said the midpoint was weaker than expected, suggesting that authorities may tolerate some weakness in the yuan. One trader at a Chinese bank said recent official fixings were not in line with his forecasts, with a bigger deviation than in the past.
Wednesday's midpoint was 47 pips weaker than Reuters' estimate of 6.9965.
The much weaker fixing quickly dragged the offshore yuan lower before onshore trading opened. Onshore, spot yuan opened at 7.0080 per dollar and eased to a low of 7.0136, its weakest level since Feb. 4.
As of midday, the yuan was changing hands at 7.0044, 64 pips weaker than the previous late session close.
"The PBOC seems to be comfortable with the RMB depreciation," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong. But he said traders are not as anxious about moves around the 7 level as in the past.
The market's attention has shifted to the economic impact of the outbreak, he added. Many businesses are still struggling to reopen and transport restrictions put in place to curb the virus' spread are preventing many people from getting back to work.
"The PBOC has not intervened much since the yuan breached 7 per dollar last year, and right now I don't think it is an effective tool to mitigate virus impact," said Aidan Yao, senior Emerging Asia economist at AXA Investment Managers.
Yao said the market will closely monitor official announcements and news reports on further fiscal easing, local government support measures and monetary stimulus from the central bank.
He expects the yuan to finish the year at around 7 per dollar.
China is widely expected to announce a cut in its benchmark Loan Prime Rate (LPR) on Thursday to ease financial strains on businesses affected by the outbreak.
Some yuan traders said weaker midpoint and a stronger dollar spurred dollar demand from corporate clients, which also weighed on the local unit.
The dollar stood tall over the languishing euro and heavily sold exporter currencies on Wednesday, with the dollar index trading at 99.435 as of midday.
The offshore yuan was trading at 7.0068 per dollar as of midday.