Yuan Declines for a Fourth Week on Signs PBOC Allowing Weaknessby
Currency index’s replica is below 95 for first time since 2014
June factory gauge worsens, while services measure improves
The yuan weakened for a fourth week on speculation that the authorities are allowing the currency to drop as the U.K.’s vote to withdraw from the European Union clouds the outlook for the world’s second-largest economy.
The Chinese currency fell 0.2 percent to 6.6599 per dollar as of 5:25 p.m. in Shanghai, taking this week’s loss to 0.5 percent. It fell earlier to a five-year low of 6.6620. A Bloomberg replica of a 13-currency index tracked by the People’s Bank of China, which is based on spot movements, also dropped below 95 for the first time since October 2014.
China’s official factory gauge retreated to the dividing line between improvement and deterioration in June, weighed by a worsening global growth outlook after Britain’s vote to exit the EU, while a measure of services improved. The yuan is extending last quarter’s 3 percent slump, which was the biggest since the nation unified the official and market rates at the start of 1994.
“The economy is likely to face more headwinds in the third and fourth quarters so I won’t be surprised to see some downward pressure on the currency,” said Roy Teo, a Singapore-based strategist at ABN Amro Bank NV. “It does seem that China is using this opportunity of a stronger dollar to allow the yuan to weaken” and support exporters.
The PBOC weakened the daily fixing by 0.28 percent to 6.6496 per dollar. The offshore yuan swung between a gain and a loss of 0.1 percent and stood at 6.6738 per dollar in Hong Kong, taking this week’s decline to 0.6 percent.
China’s June manufacturing purchasing managers index fell to 48.6 last month from 49.2 in May, data released by Caixin Media and Markit Economics showed Friday. An official gauge of manufacturing PMI for June came in at 50, matching the median estimate in a Bloomberg survey and dropping from 50.1 the previous month. The official non-manufacturing PMI was at 53.7, compared with 53.1 in May.
The PBOC on Friday denied a report it intervened in the foreign exchange market on Thursday to curb volatility. Bloomberg earlier reported the central bank intervened through state-owned banks to keep the yuan stable, according to people familiar with the matter.