China fixes yuan at over five-year low against dol­lar

The Pak Banker - - FRONT PAGE -

China's cen­tral bank on Mon­day set the value of the yuan cur­rency at a more than five- year low against the US dol­lar, ac­cord­ing to the na­tional for­eign ex­change mar­ket, in a pat­tern of weak­ness in an­tic­i­pa­tion of higher US in­ter­est rates.

The Peo­ple's Bank of China ( PBoC) put the yuan -- also known as the ren­minbi ( RMB) -- at 6.5784 to $ 1.0, down 0.45 per­cent from its fix on Fri­day, ac­cord­ing to data from the China For­eign Ex­change Trade Sys­tem. The level was the low­est level since Fe­bru­ary 2011.

China only al­lows the yuan to rise or fall two per­cent on ei­ther side of the daily fix, one of the ways it main­tains con­trol over the cur­rency. At 4: 30 pm ( 0830 GMT) on Mon­day, the yuan stood at 6.5825 to $ 1.0, down 0.35 per­cent from Fri­day's close.

"The yuan will de­pre­ci­ate grad­u­ally," Song Yu, China econ­o­mist for Gold­man Sachs/ Gao Hua Se­cu­ri­ties, told Bloomberg News. "The main driver for the de­cline would be a stronger dol­lar on the back of the ex­pec­ta­tion that the Fed will raise in­ter­est rates." US Fed­eral Re­serve Chair Janet Yellen week im­plied that in­ter­est could be lifted soon.

Yellen, speak­ing at Har­vard Univer­sity on Fri­day, said a US rate hike "prob­a­bly" would be jus­ti­fied "in the com­ing months" if eco­nomic data con­tin­ued to strengthen.

China rat­tled global in­vestors with a sur­prise de­val­u­a­tion last Au­gust, when it guided the nor­mally sta­ble yuan down nearly five per-

last rates cent over a week.

In a sign that peo­ple are less will­ing to hold the Chi­nese cur­rency, the yuan fell to sixth place from fifth as a global pay­ments cur­rency in April, trail­ing the Cana­dian dol­lar, ac­cord­ing to SWIFT, the global provider of fi­nan­cial mes­sag­ing ser­vices.

China's cen­tral bank on Fri­day de­nied a me­dia re­port that it was re­treat­ing from al­low­ing the yuan to trade way.

The bank also dis­missed an­other re­port that said fi­nan­cial au­thor­i­ties were press­ing the United States to re­veal the timing of a po­ten­tial Fed rate hike, ac­cord­ing to a state­ment on its mi­croblog.

"The Peo­ple's Bank of China al­ways ad­heres to mar­ket- ori­ented re­form," it said, adding the yuan would re­main "ba­si­cally sta­ble".

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