China’s yuan posts biggest weekly loss in 3 months
- 19 May 2023
China’s yuan eked out a small gain on Friday after authorities attempted to slow its recent slide, but still posted its biggest weekly loss in three months, pressured by a sputtering economic recovery, low yields and the US dollar’s broad rally.
The offshore yuan dropped in early morning trade to its weakest level since December, after the People’s Bank of China set the midpoint rate at 7.0356 per US dollar prior to the market open.
However, at the domestic session’s close, it recovered to 7.0235 and gained about 0.1 per cent, although for the week the yuan was still down 1.04 per cent, the worst weekly-loss in three months.
The fixing, weaker than the previous fix 6.9967, was in line with Reuters’ estimates and was the weakest fix since Dec.5.
Investors took the weak fixing as a sign that the central bank would tolerate further weakness in the yuan. The yuan has fallen 1.04 per cent against the US dollar so far this week.
However, later in the morning currency traders said major state-owned banks were seen swapping yuan for dollars in the onshore forwards market, suggesting that authorities were trying to slow its rapid fall. That came after the central bank set the fixing at 6.9967, the weakest fix since Dec.5
State banks usually trade on behalf of the central bank in China’s foreign exchange market, but they could also trade on their own behalf. In onshore deals, the yuan opened at 7.05 per dollar and was changing hands at 7.042 at midday, 50 pips weaker the previous late session close and 0.1 per cent away from the midpoint.
