Yuan Weakens to 7-Month Low Despite China’s Move to Stem Decline

  • The onshore yuan reopened from a holiday on the back foot, despite a move by China to slow its slide with a stronger-than-expected reference rate for the managed currency.
  • The currency slid 0.5% to a seven-month low of 7.21 per USD in Shanghai, as pessimism over the economic recovery and China’s policy divergence from peers continued to weigh on sentiment. The offshore yuan was little changed.
  • The People’s Bank of China had sought to curb onshore currency weakness by setting its so-called fixing at the largest premium to estimates in 2023 on 26 Jun.
  • The move suggests the PBOC is growing increasingly uncomfortable with weakness in the yuan, which was the second worst performer in Asia in the past month.
  • The offshore yuan slid to the lowest since Nov 22 on 23 Jun, amid disappointment from investors about China’s modest stimulus measures.
  • China’s travel spending during the holiday also fell short of pre-Covid levels, underscoring a slowdown in consumption. The fixing limits the onshore yuan’s moves by 2% on either side.

External Link : https://www.bloomberg.com/news/articles/2023-06-26/pboc-adds-yuan-support-as-offshore-unit-slid-over-china-holiday