Yuan Weakens as PBOC Cuts Reference Rate by Most in Six Weeksby
Move in the fixing was about 10 times bigger than ANZ expected
G-20 finance chiefs meet for talks this week in Shanghai
The yuan fell as the People’s Bank of China cut its daily reference rate by the most in six weeks, damping speculation that the exchange rate will be kept stable before a meeting of the Group of 20 central bankers and finance ministers.
The currency fell 0.04 percent to 6.5257 a dollar as of 4:43 p.m. in Shanghai, according to China Foreign Exchange Trade System prices. The central bank’s fixing was cut by 0.17 percent, more than the decline of about 0.015 percent that Australia & New Zealand Banking Group Ltd. strategist Irene Cheung said she’d been expecting.
While the central bank has said it aims to keep the yuan steady against a basket of currencies, it stabilized its fixings versus the greenback last month after an eight-day run of reductions through Jan. 7 heightened concern about the state of China’s economy and roiled global markets. Strategists in Hong Kong including Kenix Lai at Bank of East Asia Ltd. and Qi Gao at Scotiabank were predicting policy makers would keep the exchange rate fairly stable before the G-20 meeting over Feb. 26-27 in Shanghai.
“We haven’t really seen a consistent framework in the management of the currency,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. ”Maybe all this flip-flopping we’re seeing is what the authorities mean by saying they want flexibility in the currency.”
The offshore yuan fell as much as 0.15 percent, before paring its loss to 0.09 percent. It’s gained 0.9 percent this month after weakening 0.4 percent in January, when the currency sank to five-year lows in both Hong Kong and Shanghai.
A Bloomberg replica of the CFETS RMB Index, which measures the yuan against 13 currencies, fell for the third day in a row and has declined 1.5 percent this year. The yuan’s volatility versus the greenback will increase and the exchange rate is basically stable against the basket, PBOC Governor Zhou Xiaochuan said in an interview with Caixin magazine published this month.