China weak­ens yuan again

The Myanmar Times - - International Business -

CHINA weak­ened the yuan’s ref­er­ence rate against the dol­lar for the sixth-straight trad­ing day yes­ter­day, the long­est se­quence in nine months, after ex­pec­ta­tions of a Fed in­ter­est rate hike put up­ward pres­sure on the US cur­rency.

A se­ries of pos­i­tive read­ings on the US econ­omy, and in­creas­ingly up­beat state­ments from Fed­eral Re­serve boss Janet Yellen, have fanned spec­u­la­tion the cen­tral bank will lift bor­row­ing costs by the end of the year. This has sent the dol­lar ral­ly­ing against most of its peers, in­clud­ing the yuan, which is also known as the ren­minbi.

China’s lead­er­ship has re­peat­edly pledged to lib­er­alise trad­ing in the cur­rency but still keeps a tight rein on it, only al­low­ing it to rise or fall 2 per­cent on ei­ther side of a daily fix in na­tional for­eign ex­change mar­kets.

Yes­ter­day, the Peo­ple’s Bank of China (PBoC) set the unit’s cen­tral rate against the green­back at 6.7258, a new six-year low after it passed the 6.7 mark on Oc­to­ber 10.

It was the long­est se­quence of con­sec­u­tive re­duc­tions since Jan­uary, ac­cord­ing to Bloomberg News, when world mar­kets were roiled by con­cerns over the state of the Chi­nese econ­omy and Bei­jing’s abil­ity to deal with the cri­sis.

An­a­lysts ex­pect the cur­rency to fall fur­ther in the face of dol­lar strength, slow­ing growth in the Asian gi­ant, and cap­i­tal out­flows.

Michael Ev­ery, head of Asia-Pa­cific fi­nan­cial mar­kets re­search at Rabo Bank, told AFP, “We have smashed through what I had dubbed as ‘the line-in-the-sand du jour’ of 6.7 and where we stop, no one knows.

“Clearly, the PBoC don’t want to see a sharp sell-off; but they also no longer seem to mind a slow(ish) one. Per­haps the next psy­cho­log­i­cal tar­get is 6.75,” he wrote in an email, say­ing it was a “roundish num­ber”.

“After that we must surely be look­ing at the 6.83 level that the cur­rency was pegged to [the dol­lar] from 2008 all the way to mid-2010,” he added.

“Clearly, there is a lot of aton­ing to do for all that pre­vi­ous peg­ging.”

The world’s sec­ond-largest econ­omy ex­panded 6.9pc in 2015 – its weak­est rate in a quar­ter of a cen­tury – and has slowed fur­ther this year.

In Au­gust last year, Bei­jing sud­denly de­val­ued the yuan by nearly 5pc over a week, caus­ing in­vestors to dump the cur­rency in vol­umes not seen since 1994.

That is un­likely to hap­pen again un­der the 2pc con­trol mar­gin. –

Newspapers in English

Newspapers from Myanmar

© PressReader. All rights reserved.