China's yuan hits 2-week low as investors weigh PBOC foreign exchange reserve hike
- Its offshore counterpart followed the weakening trend and last fetched 6.6782 per dollar, down about 0.13% in Asian trade
China's yuan slid to a two-week low following the central bank's decision to raise foreign currency reserve requirements, an effort to slow its prolonged rally.
- Central bank's decision to raise foreign currency reserve requirements.
- Efforts to slow the yuan's prolonged rally and appreciation.
- Market reaction to the PBOC's official guidance.
SHANGHAI: China’s yuan slid to a more than two-week low against the dollar on Wednesday, pressured by weaker official guidance, while investors continued digesting the central bank’s decision a day earlier to raise foreign currency reserve requirements.
The onshore yuan eased to a low of 6.6832 per dollar in morning deals, the weakest level since October 19, before changing hands at 6.6794 as of 0303 GMT.
Its offshore counterpart followed the weakening trend and last fetched 6.6782 per dollar, down about 0.13% in Asian trade.
The yuan’s sudden turnaround came after the People’s Bank of China said on Tuesday that it would raise the foreign exchange reserve requirement ratio (RRR) by 2 percentage points, to 6% from 4%.
Currency traders and analysts called it one of the strongest attempts yet to slow the prolonged rally of the yuan, which has strengthened about 5% so far this year.
“The PBOC is pulling the handbrake on a surging currency,” said Eugenia Victorino, head of Asia strategy at SEB.
“China’s surging trade keeps the yuan firm. The central bank has been suppressing yuan appreciation for much of 2026 … If the trade-weighted index keeps stretching higher, Beijing has plenty of powder left to step in again.”
Prior to the market opening on Wednesday, the PBOC set the midpoint rate at 6.7180 per dollar, its weakest level since October 23 and 369 pips weaker than a Reuters estimate of 6.6811. The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.
The central bank has been gradually strengthening its daily yuan official guidance this year, but at levels weaker than market expectations, suggesting it is seeking to manage the pace of appreciation, market watchers said.
Based on Wednesday’s official guidance rate, the CFETS yuan basket index, which tracks the yuan’s trade-weighted value, fell to 103.75, down from Tuesday’s 52-month high but still up about 5.9% this year, according to Reuters calculations based on official data.
Separately, market attention was on the outcome of the US midterm elections and their possible impact on global currency markets. Investors were positioning for a strong Democratic showing.