People's Bank of China limits yuan slideBusiness | 8 Aug 2019 11:00 am
The People's Bank of China set its official yuan midpoint below the key seven to the US dollar threshold for the first time since global financial crisis.
The central bank set the midpoint rate at 7.0039 per dollar before market open, 43 pips weaker than the previous fix of 6.9996, and was the weakest since April 21, 2008.
“China wants to prevent panic now,” said Gao Qi, a strategist at Scotiabank. “The PBOC will continue to send signals to stabilize the yuan in the near term – it will likely issue stronger-than-expected fixings, sell bills in Hong Kong and maybe even boost yuan forward points in the offshore market.”
Broad weakness in the official guidance rate came after losses in the spot yuan a day earlier, as the local unit continued to be weighed by an escalation in Sino-U.S. trade tensions. However, state bank transactions in the swap market this week have helped slow the decline.
China’s fixing is published every trading day at 9:15 a.m., after a group of 14 lenders submit their rates. The yuan is then allowed to move 2 percent in either direction. The rates are calculated with formulas that take into account factors such as the previous day’s official close at 4:30 p.m, the yuan’s move against a basket of currencies and the moves in other major exchange rates.-Reuters/Bloomberg