SHANGHAI (Reuters) – The Chinese yuan fell to a new 13-month low against the dollar on Monday, weighed down by much weaker central bank fixation and expectations that the Chinese currency will continue to fall as US trade tensions worsen.
FILE PHOTO: Chinese 100 yuan banknotes can be seen in this image taken on July 1
In addition to developments in the global trading environment, investors are focusing on liquidity policymakers have slipped into the financial system.
"Along with announcements by the People's Bank of China (PBOC) that will ease credit conditions and a slower pace of monetary policy over the past two months, this represents a significant shift towards accommodative policy," the analysts said Moody's said in a note.
Prior to opening, the PBOC lowered the mid-market to $ 6.8131 per dollar, broadly in line with market forecasts, 189 pips or 0.28 percent weaker than the previous 6.7942 fix last Friday.
On the spot market, the onshore yuan opened at 6.8159 per dollar, dropping to 6.8401, before moving to 6.8353 at midday, 213 pips weaker than the previous closing price and 0.33 per cent softer than the mean.
The onshore spot yuan has posted the lowest intraday level since June 27, 2017.
The offshore yuan was 0.10 percent lower at midday than its onshore counterpart at 6.8422 per dollar.
Despite the recent sharp losses in the yuan, market sentiment remains relatively stable, traders said, and Monday saw monthly demand for dollars from their corporate clients in the morning trade.
A Chinese bank trader in Shanghai said the nearest resistance to the yuan is likely to be $ 6.9 per dollar.
DBS Group Research strategists have recalibrated their yuan forecast to 6.90 per dollar by the end of 2018, with the dollar likely to strengthen in the second half of the year as the US Federal Reserve tightened monetary policy and other trading tensions.
The yuan's implied futures value against the dollar continued to rise in the forward market on Monday, with the one-year dollar / yuan swap reading at -148 points at noon versus last Friday's – 80 points fell.
Analysts and yuan traders attributed declines in forward points to loose yuan liquidity, and major state-owned banks exchanged dollars for yuan flows.
Last week, the Chinese currency weakened 0.4 percent against the dollar, the seventh weekly loss. On a trade-weighted basis, according to official figures from the Chinese Forex Trading System (CFETS), it fell 0.9 percent against a basket of the currencies of its trading partners.
The index, which was released weekly and monthly, stood at 92.95 on Friday, CFETS said on its website.
The dollar has barely changed against its major trading partners on Monday as market participants expected key central bank meetings this week. [FRX/]
The global dollar index closed at lunchtime at 94,721, compared with the previous closing price of 94,675.
The Thomson Reuters / HKEX Global CNH Index, which tracks the daily offshore yuan against a basket of currencies, was 92.97, weaker than the day before, 93.39.
coverage by Winni Zhou and Andrew Galbraith; Edited by Sam Holmes