China set a daily anchor for trading in its currency at the weakest since 2008 but again avoided moving that official rate beyond the symbolic 7-yuan-per-dollar level.
On Wednesday, the central bank fixed the midpoint for onshore yuan trading at 6.9996, 0.45% weaker than the previous day. The People’s Bank of China lets the currency move up to 2 percentage points on either side of that figure. It sets the range based partly on market prices but has discretion to adjust it using a “countercyclical” factor.
On Monday, Beijing let traded prices for its currency weaken past 7 per dollar, prompting the U.S. Treasury to designate it a currency manipulator. However, Tuesday’s daily fix was set at 6.9683, helping reassure markets it didn’t intend to pursue a sharp depreciation.
Cynthia Wong, who heads
’s fixed-income and currencies-trading business for emerging markets in the Asia-Pacific region, said investors thought the yuan could weaken further but that it would be smooth, rather than sudden.
By early Wednesday afternoon in Hong Kong, the yuan had weakened about 0.4% both onshore and in the less tightly controlled offshore market to 7.0463 and 7.0811 a dollar, respectively.
Frances Cheung, head of macro strategy for Asia at
, said Chinese authorities had no hard currency level to defend and that Beijing is trying to “simply to smooth market movement.”
Qi Gao, a currency strategist at Scotiabank, said politics, rather than economic or financial issues, would be critical in determining the yuan’s direction.
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