The yuan halted its longest losing streak on record amid speculation China’s central bank is seeking to avoid one-way depreciation bets at a time of rising capital outflows.
The drops of the past two weeks were “only a market phenomenon spawned by expectations of the rate hike” by the US Federal Reserve, the Xinhua news agency said in a commentary on Thursday.
Xinhua said that the Chinese economy’s strength will prevent the yuan from dropping too far.
Photo: Reuters
“The yuan has been in its gradual decline because of the US rate hike,” said Daniel Chan, a Hong Kong-based analyst at Brilliant & Bright Investment Consultancy Ltd. “Now that the Fed has moved, it’s time for China to make sure market expectations on the yuan aren’t one-sided toward depreciation, as that could risk accelerating capital outflows.”
The yuan climbed 0.03 percent to close at 6.4815 a dollar in Shanghai, according to China Foreign Exchange Trade System prices. It fell 1.3 percent in the past 10 days — the longest losing streak in data going back to April 2007 — as US interest rates were raised for the first time in almost a decade.
Chan said the yuan, which has retreated 0.4 percent this week, could fall by as much as 3 percent by June 30 in a “gradual manner” as the US dollar strengthens.
The People’s Bank of China (PBOC) lowered the yuan’s daily fixing by 0.09 percent to 6.4814 per US dollar, the weakest level since June 2011. The authority has reduced the reference rate for 10 days, matching a streak last month that was the longest since 2008.
The Bloomberg Dollar Spot Index was headed for the biggest weekly advance since the period through Nov. 6.
In Hong Kong’s free market, the offshore yuan slipped 0.05 percent on Friday and retreated 0.5 percent for the week to 6.5644 per US dollar, according to data compiled by Bloomberg.
The gap between the onshore and offshore yuan’s spot rates exceeded 0.08 per US dollar — 800 so-called pips — on Wednesday before suspected intervention by the Chinese central bank in the offshore market.
The difference was at 829 pips on Friday, compared with an average 423 since a devaluation in August.
Financial institutions including the PBOC sold 221 billion yuan (US$34 billion) of foreign exchange last month, a sign of capital outflows, data showed this week.
The New Taiwan dollar depreciated 0.3 percent on Friday and 0.5 percent this week to NT$33.117, the weakest close since Oct. 2, according to prices from Taipei Forex Inc.
One-month non-deliverable forwards were little changed for the day at NT$32.98, after sliding 0.8 percent on Thursday in the biggest decline in three months.
In South America, the Chilean peso led gains among global currencies after the nation’s central bank increased interest rates earlier than economists had forecast and as its chief export, copper, rallied.
The peso rose 1.4 percent to 698.75 per US dollar, closing stronger than 700 for the first time in five weeks. That was the best performance among 31 major currencies.
Chile’s central bank surprised analysts by raising borrowing costs for the second time this year, following a pause last month, with annual inflation running above the nation’s 4 percent target for next year.
Additional reporting by AFP and staff writer
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