Yuan sees biggest weekly loss on talk of reform
Print Edition
The yuan yesterday suffered the largest weekly loss on record on talk the Chinese central bank may reform the exchange rate market further.
The yuan briefly hit a 10-month low of 6.1808 per US dollar before closing at 6.1450 yesterday.
The closing was nearly 0.3 percent weaker than Thursday’s despite the People’s Bank of China’s slight firming of the central parity rate to 6.1214 per dollar. The yuan is allowed to trade between 1 percent on each side of the daily fixing set by the PBOC.
The yuan weakened around 0.9 percent this week and was more than 2 percent lower than its 20-year high of 6.0406 reached on January 14.
Economists have attributed the currency’s recent tumble to the PBOC’s intention to squeeze out speculative foreign capital betting on continued appreciation of the yuan. They also speculated the move as a prelude to market-oriented reforms, including widening the yuan’s trading band.
“The PBOC intervention largely reflects its determination to tame appreciation expectations and counter hot money inflows as the central bank prepares to widen the band,” said Nathan Chow, an economist with the DBS. “It does not suggest a fundamental shift of policy toward weakening the currency.”
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