China’s yuan to remain under pressure amid stalling economic recovery, as central bank weighs moves to stem weakness
- Yuan has weakened by 4.7 per cent against the US dollar since the start of the year, but the central bank has refrained from direct intervention
- Overseas exporters have sold the yuan in favour of currencies, such as the US dollar and euro, further depreciating China’s currency
China’s yuan is likely to face more pressure in the coming weeks, prompting questions as to whether the central bank will intervene to support its currency, which has weakened by 4.7 per cent against the US dollar since the start of the year.
The yuan eased against the US dollar again on Thursday after having fallen to a seven-month low on Wednesday.
The People’s Bank of China (PBOC) set the daily midpoint fixing stronger than expected on Thursday, seen by market participants as an official attempt to rein in weakness.
The central bank’s daily midpoint setting is closely monitored by traders, and they widely take deviations between the official rate and their predictions as a sign of the PBOC’s stance towards the foreign exchange market.
We believe that although the yuan exchange rate may remain volatile for a certain period of time in the future, the momentum of depreciation will gradually weaken
“We believe that although the yuan exchange rate may remain volatile for a certain period of time in the future, the momentum of depreciation will gradually weaken,” said Northeast Securities on Thursday.
