BEIJING: China guided the yuan to its weakest level in more than four years as the country deals with currency outflows and a slowing economy while trying to loosen its grip on the exchange rate.
Investors have expected the yuan to weaken as Beijing works to boost an economy hurt by a relatively strong currency. Beijing is also bowing to investor pressure to deliver on its pledge of a more market-driven yuan, while trying to avoid a repeat of mistakes like its market-roiling summer devaluation.
China set the yuan at 6.414 to the U.S. dollar Wednesday, its weakest level since August 2011, continuing a month-long trend and following the market’s lead. In the past the setting didn’t always coincide with where the yuan had last traded in the market, as the central bank tightened its grip to stabilize the currency.
The yuan has lost as much as 3.4% of its value since Aug. 10, the eve of the 2% devaluation.
“What has happened in the past few days shows a clear intention from the authorities that they would like to see an orderly and mild depreciation of the yuan,” said the head of trading at a Guangzhou-based, state-run bank. “Everything, ranging from the dismal trade data to the prospect of a Fed rate hike, calls for a weaker yuan. If you ask 10 traders in China, nine will tell you that they expect the currency to depreciate in the near term.”
