BEIJING: The yuan fell again yesterday after China’s central bank set the reference rate at the lowest since May 2011 amid pessimism in the market.
The yuan shed 0.3 percent from last Thursday to 6.5172 per US dollar yesterday, the weakest in nearly 5 years.
This came after the People’s Bank of China yesterday lowered the central parity rate to 6.5032 per US dollar from Thursday’s 6.4936.
The yuan can trade at 2 percent on each side of the central parity rate each day.
Also from yesterday, market trading of the yuan would end at 11:30pm in Shanghai to suit overseas needs, but the price at 4:30pm is officially quoted as the daily closing price.
The PBOC has cut the yuan/US dollar reference rate for five straight trading days amid a weak economy in China.
The Caixin General China Manufacturing Purchasing Managers’ Index slipped to 48.2 points yesterday as factory activity contracted for the 10th straight month in December.
The yuan also continued its weakening trend from last year as hopes for US economic recovery and interest rate hikes strengthened the US dollar and spurred capital outflow from emerging markets.
The yuan fell 4.5 percent against the greenback last year, its biggest annual drop since 1994.
However, an index compiled by the China Foreign Exchange Trade System was 100.94 on December 31, indicating the yuan rose 0.94 percent against a basket of currencies, including the US dollar, euro, yen and the British pound, from the end of 2014.
“The yuan last year still outperformed the euro and many emerging market currencies, and the yuan/US dollar depreciation will be a new normal,” said Tommy Xie, an OCBC economist. “The market is generally pessimistic about the yuan valuation in 2016, and we think the central bank is now more tolerant about yuan depreciation and the offshore-onshore price gap.”
