China’s yuan slides to 5-month low after weaker fixing from PBOC

China’s yuan weakened slightly against the dollar on Tuesday to a fivemonth low, after its central bank set the official guidance rate at the weakest level in nearly two months.

The yuan was trading at 7.2447 per dollar at 0318 GMT, only 7 pips weaker than the previous close, after earlier hitting a 5-month low of 7.2455.

The currency is down 2.1% this year, pressured by its relative low yields versus other currencies and outflows of foreign investment from an anaemic stock market.

Prior to the market’s opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1059 per dollar, the weakest level since March 1.

Market participants were watching closely for any moves in the official guidance rate.

PBOC loosened its grip on the yuan, and this could be another step for the bank to release some depreciation on the yuan in a gradual pace, Citi analysts wrote in a note, adding that they see more room for PBOC to guide the fixing weaker.

China’s yuan weakens to fivemonth low as dollar stays strong

“We remain bearish on CNY but revise our end-2Q USD/CNY forecast to 7.35 (from 7.40 previously) to acknowledge that the PBOC continues to manage the CNY depreciation carefully,” analysts at Bank of America said in a note.

The spot yuan opened at 7.2429 per dollar and was changing hands at 7.2447 at midday, 7 pips weaker than the previous late session close and 1.95% weaker than the midpoint.

The dollar remained strong, with investors taking cues from the U.S. Federal Reserve’s higher-for-longer interest rate stance.

The global dollar index rose to 106.11 from the previous close of 106.077. The offshore yuan was trading 92 pips weaker than the onshore spot at 7.2539 per dollar.

Meanwhile, Non-ferrous metals companies led the declines in China, slumping 4.5%, while coal-related stocks dropped 2.4%.

Tech shares led gains in Hong Kong, with delivery giant Meituan and e-commerce giant JD.com up 8.0% and 6.1%, respectively.

UBS strategists upgraded MSCI China equities to “overweight” as the index has a higher weight in consumption, where they see early signs of improvement, and has been little affected by the weak property sector. At the close, the Shanghai Composite index was down 0.74% at 3,021.98.

The blue-chip CSI300 index was down 0.7%, with its financial sector sub-index lower by 0.09%, the consumer staples sector up 0.96%, the real estate index down 1.07% and the healthcare sub-index up 1.23%.

The smaller Shenzhen index ended down 0.19% and the start-up board ChiNext Composite index was higher by 0.154%.

HK shares jump on policy support; China slips

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.84%, while Japan’s Nikkei index closed up 0.3%.

At 0831 GMT, the yuan was quoted at 7.2468 per U.S. dollar, 0.04% weaker than the previous close of 7.244. At the close of trade, the Hang Seng index was up 317.24 points or 1.92% at 16,828.93. The Hang Seng China Enterprises index rose 2.12% to 5,954.62.

The sub-index of the Hang Seng tracking energy shares rose 0.3%, while the IT sector rose 3.81%, the financial sector ended 1.4% higher and the property sector rose 1.89%.,