Yuan Falls a Fourth Day as Fix Cut After Data Suggests Outflows

  • Central bank weakens reference rate to lowest since Feb. 5
  • Outflows significant but not as bad as feared: Goldman

China’s yuan fell for a fourth day as the central bank cut its daily fixing and a report suggested outflows persisted in January.

The People’s Bank of China set its reference rate at the lowest level in almost three weeks after figures from the nation’s foreign-exchange regulator released Tuesday afternoon showed banks net sold overseas currencies to their clients for a seventh straight month in January. The data indicate outflows were still significant but not as rapid as some had feared, Goldman Sachs Group Inc. economists led by MK Tang in Hong Kong wrote in a note.

The yuan fell 0.1 percent to 6.5328 a dollar as of 4:44 p.m. in Shanghai, according to China Foreign Exchange Trade System prices. It dropped to 6.5332 earlier, the weakest level since Feb. 15, and has lost 0.24 percent in a four-day streak. The central bank cut the reference rate by 0.04 percent to 6.5302 following a 0.17 percent reduction on Tuesday.

"Sentiment hasn’t fully recovered, and there’s still depreciation pressure in the long run considering China’s fundamentals and capital outflows," said Tommy Xie, a Singapore-based economist at Oversea-Chinese Banking Corp. "The PBOC will likely keep the yuan stable against a basket, leading to greater two-way volatility of the currency against the dollar, before the G-20."

Officials from the world’s biggest economies will meet in Shanghai on Feb. 26 and 27 to discuss the recent turmoil in China’s markets and ways to bolster a safety net for the global financial system, according to people familiar with the agenda for the talks.

Chinese banks sold a net 454.8 billion yuan ($70 billion) of overseas currencies to their clients in January, according to the State Administration of Foreign Exchange. That compares with 568.3 billion yuan in December. The data show that stabilization attempts that Chinese authorities took last month, such as verbal defense of the exchange rate and and stricter capital controls, might have been effective, according to the Goldman note.

A Bloomberg replica of the CFETS RMB Index, which measures the yuan against 13 currencies, fell for a second day. The offshore yuan declined 0.04 percent to 6.5363, data compiled by Bloomberg show.

— With assistance by Tian Chen

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