SHANGHAI/SINGAPORE : China's yuan has skidded to six-month lows against the dollar and analysts say it could weaken further as investors fret over a bumpy pandemic recovery in the world's second-largest economy. Disappointing economic data, widening yield differentials with the United States, upcoming cor
SHANGHAI/SINGAPORE : China's yuan has skidded to six-month lows against the dollar and analysts say it could weaken further as investors fret over a bumpy pandemic recovery in the world's second-largest economy.
"The yuan suffers as China's reopening story is less appealing than before, and there is no sign of further stimulus," said Gary Ng, senior economist for Asia Pacific at Natixis. Sources told Reuters that the commerce ministry has asked exporters, importers and banks recently about their currency strategies and how a weakening yuan could affect their businesses.
However, despite the yuan's quickening tumble over the past month, traders have only reported a few occasions when state banks have been suspected of stepping in to support the currency."The PBOC essentially appears content to let the rising U.S. dollar buoy USD/CNY higher, amid China's fading growth momentum," said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
Still, economists and analysts don't expect sharp falls from here on. Among half of a dozen of global investment houses surveyed by Reuters this week, all said they don't foresee the yuan weakening beyond 7.3 this year, the lows hit in 2022 as strict anti-virus curbs battered the economy. However, implied volatility for the currency, an options market gauge of future volatility, has been fairly stable. The one-month tenor stood at 4.5, the highest since April. And six-month yuan traded in forwards market was priced at 6.96 per dollar.
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