- Currency is within 0.3 percent of weakest close since 2010
- China’s economy has yet to hit bottom, DBS Group says
The offshore yuan fell toward the weakest closing level in more than five years amid concern China’s policy makers will guide the currency lower to boost economic growth.
The nation is more likely to fine-tune monetary policy in the second half, with targeted cuts in bank reserve-requirement ratios as the economy faces pressure, according to a front page commentary in the state-run China Securities Journal. The People’s Bank of China weakened the yuan’s daily reference rate by 0.18 percent on Tuesday, extending the past month’s cuts to 1.2 percent.
“The trend of depreciation will continue as China’s economy hasn’t hit bottom,” said Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong. “A sharp yuan depreciation versus the greenback will reignite panic and lead to a fund exodus, so the decline will be gradual.”
The yuan traded in Hong Kong’s offshore market declined 0.2 percent to 6.6863 a dollar as of 4:46 p.m., within 0.2 percent of the closing price on Jan. 6 that was the lowest since September 2010. The onshore rate dropped as much as 0.09 percent to 6.6715, the weakest since December 2010. A Bloomberg replica of a 13-currency index tracked by the PBOC dropped 0.2 percent to 94.4803.
China’s central bank has allowed the yuan to fall at a faster rate against the basket of peers than versus the dollar this year as it sought to support the nation’s exporters and prevent destabilizing outflows. China’s GDP growth is forecast to slow to 6.5 percent this year from 6.9 percent in 2015, the lowest in a quarter century, according to estimates compiled by Bloomberg.
— With assistance by Tian Chen