March 27 (Bloomberg) -- The yuan fell for a second day after the People’s Bank of China lowered the currency’s reference rate to a level that limits appreciation.
The People’s Bank of China cut the daily fixing by 0.02 percent to 6.2727 per dollar, 0.98 percent weaker than yesterday’s closing spot price. The currency is allowed to trade as much as 1 percent either side of the rate. The yuan touched 6.2095 on March 25, its strongest level since the government unified official and market exchange rates at the end of 1993.
“The yuan is taking a breather after posting a new high,” said Patrick Cheng, a foreign-exchange analyst at Haitong International Securities Co. in Hong Kong. “There could be a bit of caution among officials over the Cyprus situation when they set the fixing.”
The yuan dropped 0.05 percent to 6.2140 per dollar as of the close in Shanghai, prices from the China Foreign Exchange Trade System show. That’s 0.95 percent stronger than today’s reference rate.
In Hong Kong’s offshore market, the Chinese currency slipped 0.06 percent to 6.2085 per dollar, data compiled by Bloomberg show. Twelve-month non-deliverable forwards fell 0.05 percent to 6.3020, a 1.4 percent discount to the spot rate in Shanghai.
One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, rose one basis point, or 0.01 percentage point, to 1.215 percent.
Taiwan became the world’s fourth-largest offshore yuan center in February, excluding Hong Kong and China, according to Society for Worldwide Interbank Financial Telecommunication, a financial messaging platform. The island trailed behind the U.K., Singapore and France in the rankings. Yuan payments made by Taiwan have grown 120 percent over the past six months, SWIFT said in a report yesterday.
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