China kept up its resistance against yuan weakness by setting a stronger-than-expected currency fixing for a seventh straight day.
(Bloomberg) — China kept up its resistance against yuan weakness by setting a stronger-than-expected currency fixing for a seventh straight day.
The People’s Bank of China set the fix at 6.8821 per dollar, 103 pips stronger than the average estimate in a Bloomberg survey of analysts. On Tuesday, the PBOC set the yuan reference rate at 249 pips stronger than the average estimate in a survey of market participants, which was the second-strongest bias on record.
The recent spell of yuan weakness triggered by the PBOC’s unexpected rate cut last month has worsened following hawkish comments from the Federal Reserve and bets on bigger rate increases by the European Central Bank. Banks including Goldman Sachs Group Inc. are now forecasting the yuan to fall to 7 per dollar, a level last seen in July 2020.
Some analysts expect the PBOC to use more forceful measures in case of the yuan’s swift move lower. The PBOC had reduced bank’s foreign-currency reserve requirement ratio in April when the yuan slumped more than 4%. It could also soak up yuan liquidity in the offshore market to make it more costly to short the currency.
The offshore yuan fell 0.1% to 6.9117 per dollar at 9:22 a.m. in Shanghai.
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