Yuan eases on dollar demand, snapping a 3-day winning streak

China’s yuan weakened against the US dollar on Wednesday, snapping a three-day winning streak and pulled lower by rising corporate demand for cheaper greenbacks.

The yuan showed some stability early in the week and paused its steep downtrend after the central bank moved to put a floor under the currency as the trade war with the US grinds on.

“The market is looking for a bottom on the ‘counter-cyclical factor’, and on the pragmatic scale, the Fed is still going to raise rates and ultimately that should favor the USD,” Stephen Innes, Singapore-based head of Asia-Pacific trading for OANDA, said on Wednesday.

Prior to market opening on Wednesday, the People’s Bank of China (PBC), the country’s central bank, set the midpoint rate at 6.8072 per dollar, 20 pips weaker than the previous fix of 6.8052.

The guidance rate was 25 pips firmer than Reuters’ estimate of 6.8097 per dollar.

In the spot market, the onshore yuan opened at 6.8090 per dollar and was changing hands at 6.8238 during the afternoon trading session, 0.30 percent weaker than the previous late session close.

Traders said the morning moves followed corporate clients’ dollar buying, which dragged spot yuan lower.

“Despite USD/CNY’s return to 6.80, its volatility is converging with and exceeding G7 FX volatility for the first time in history,” Bank of America Merrill Lynch said in a note to clients on Wednesday.