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CHINA’S central bank ramped up support for the yuan in its daily guidance on Thursday (Apr 11) after an overnight surge in the US dollar put authorities on alert for sharp declines in the local currency.
The People’s Bank of China (PBOC) set the midpoint rate for the yuan at 7.0968 per US dollar prior to market open on Thursday, 1,654 pips firmer than a Reuters estimate, the biggest discrepancy since Reuters started its estimations in 2018.
The record discrepancy comes after the offshore yuan dropped the most in three weeks overnight.
The yuan has come under intense pressure recently from a strengthening US dollar and the wide gap between US and Chinese interest rates.
The US dollar rose across the board on Wednesday after data showed US inflation sped up more than forecast in March, pushing out the expected timing of a Federal Reserve rate cut to September from June.
“The latest weakness of the yuan is mostly due to a stronger dollar rather than domestic developments,” said Lynn Song, chief economist for Greater China at ING.
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He expects the PBOC to continue to resist rapid yuan depreciation although the yuan is likely to gradually weaken in the near-term.
The spot yuan opened at 7.2370 per US dollar and was changing hands at 7.2355 at 0225 GMT, 10 pips away from the previous late session close and 1.95 per cent away from the midpoint.
The spot rate is currently allowed to trade within a 2 per cent range above or below the official fixing on any given day. REUTERS
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