China’s yuan ends at weakest since GFC

• China’s onshore yuan extended losses to end the domestic session at its lowest level against the dollar since the global financial crisis of 2008, while the offshore yuan hit a record low, pressured by expectations of more U.S. rate hikes.
• Currency traders said the yuan was reacting to broad greenback strength in global markets as the dollar hit a fresh two-decade peak against a basket of currencies, buoyed by safe-haven demand and a hawkish Federal Reserve.
• Losses were slightly trimmed after the market close, when the People’s Bank of China (PBOC) said stabilising the foreign exchange market is the top priority and reiterated that the yuan has a solid basis to be basically stable.
• Market participants usually view such official remarks as a sign that authorities are growing uncomfortable with rapid currency movements. The yuan has lost just over 12% against the dollar so far this year, though it has been fairly resilient against a basket of currencies of China’s major trading partners.
• Several currency traders said corporate dollar buying was very strong on 28 Sep 22, putting additional pressure on the yuan.
• “Those who want to convert their FX receipts into yuan are holding back and waiting for better prices,” said a trader at a foreign bank.
• A second trader at a foreign bank said the weakness in the yuan was in line with other currencies on 28 Sep 22.
• “Non-dollar currencies all crashed in early trades, the yuan can’t escape,” said the trader.
• Prior to the market opening, the PBOC set the midpoint rate at 7.1107 per dollar, the lowest level in over two years, and 385 pips or 0.54% weaker than the previous fix of 7.0722.
• The daily midpoint fixing limits onshore trade to a narrow range of 2% on either side. The domestic closing price was 71 pips from the weaker end of the downside limit.
• “The authorities have been seeking to slow the pace of depreciation through setting much stronger than expected fixings, but it is clear that there is no particular level that they are seeking to defend,” analysts at ANZ said in a note.
• “Hence, in the face of further dollar strength, the authorities will ultimately allow the yuan to weaken further but will act to ensure any move is not disorderly.”

External Link : https://www.reuters.com/markets/asia/chinas-yuan-ends-weakest-since-global-financial-crisis-hits-record-low-offshore-2022-09-28/