China’s yuan weakened to its lowest level since November

China’s yuan may be entering the final leg of its journey toward 7 per dollar.
Chief Investment Office11 Jun 2019
Photo credit: AFP Photo

China’s yuan may be entering the final leg of its journey toward 7 per dollar.

The offshore currency weakened to the lowest level since November on Friday (7 June), moving closer to a record low it last hit in early 2017. The onshore yuan breached the 6.93 level on Monday (10 June) for the first time this year as markets reopened after a long weekend. The mainland rate has not touched 7 since the financial crisis.

Bearish technical signals and dovish comments from the People’s Bank of China (PBOC) are adding pressure to the currency, only weeks after yuan watchers speculated the central bank was helping limit depreciation. Analysts are now increasingly convinced that officials will not stand against the currency breaking 7, a thesis made stronger by PBOC Governor Yi Gang’s comment that no specific level for the yuan is important.

China’s currency became a barometer of stress for traders around the world in May, when tensions between the US and China unexpectedly escalated. This month’s possible meeting between US President Donald Trump and President of the People’s Republic of China, Xi Jinping at the G-20 summit in Osaka could be the catalyst for the currency to break - or escape - 7 per dollar.

Yi also said there’s “tremendous” room to adjust monetary policy if the trade war deepens. Data Monday showing China’s imports tumbled 8.5% in May – more than double the predicted pace – revealed weakness in the economy. – Bloomberg News.

 The US Dollar Index (DXY) decreased 0.22% to 96.761 on Monday (10 June), the pound weakened 0.41% to USD1.2685, and the euro fell 0.19% to USD1.1312. The yen declined 0.24% to 108.45 per dollar.

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