Yuan weak after hitting near 6-week low on Yellen’s views

SHANGHAI: China’s yuan weakened in midday trade on Monday after slipping to near six-week lows in early deals as the dollar held broadly higher after US Federal Reserve Chairperson Janet Yellen’s upbeat comments on the US economy.

Spot yuan opened at an intraday low of 6.6850 per dollar, its weakest level since July 20, but recovered by midday to trade at 6.6736, still below Friday’s close at 6.6690.

The dollar index, which tracks the greenback against a basket of six rivals, was underpinned by Yellen’s comments and was steady on the day at 95.551, not far from Friday’s high of 95.594, its loftiest level since Aug. 16. Reflecting the dollar’s strength, the People’s Bank of China set the midpoint rate at 6.6856 per dollar prior to market open, the official guidance rate’s weakest level since July 25.

“Although the yuan weakened today, the (domestic) market isn’t convinced of the dollar’s ability to strengthen sharply,” said a dealer at a European bank in Shanghai.

“As dollar demand was limited, the PBOC largely stayed on the sidelines to let the market decided the yuan’s value. The yuan’s partial recovery from its intraday low indicated that its downside may be limited for now.” Provided the dollar don’t rally hard in global markets, the Chinese currency is likely to find firm support at 6.7/dollar in coming weeks, traders forecast.

China often tries to keep the yuan steady during major international diplomatic events, such as the G20 summit in Hangzhou in early September.

Traders believe Beijing may also keep the currency from moving too much ahead of its formal addition to the IMF’s currency basket on Oct. 1.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.89.

The offshore yuan was trading 0.21 percent weaker than the onshore spot at 6.6877 per dollar.